The European Commission has conditionally approved the acquisition of BASF Colors & Effects (Ludwigshafen, Germany) by the DIC Corporation (DIC) (Tokyo, Japan). This approval under the EU Merger Regulation is conditional on full compliance with a commitments package offered by DIC.
BASF Colors & Effects, a subsidiary of BASF SE that is active in the production and sale of pigments and other colorants, and DIC, a printing inks, organic pigment, and synthetic resins manufacturer, are market leaders in the pigments segment. In particular, both companies are the two main suppliers of certain categories of pigments worldwide.
“Pigments are essential inputs for many consumer products that require a coloring process, for example in the automotive and advanced plastics value chains,” says Margrethe Vestager, executive vice-president in charge of competition policy. “There are only a few alternative producers for these products and the combination of DIC and BASF Colors & Effects risked depriving customers of high quality pigments. This merger is approved on the condition that the companies divest DIC's main manufacturing facility for pigments, thereby preserving effective competition in the market.”
The Commission's investigation primarily focused on perylene pigments, which constitute a chemical class of red, maroon, violet, and black pigments, as well as quinacridone pigments, a chemical class of pigments with tints ranging from yellowish red to violet. Both pigments are commonly used in complex applications such as automotive coatings, advanced plastics applications, and some industrial applications.
There was concern within the Commission that the proposed transaction would reduce market competition for perylene and quinacridone pigments. To address these concerns, DIC offered to divest its pigment manufacturing facility, operated by its subsidiary Sun Chemical and located in Bushy Park (Goose Creek, South Carolina, USA). By removing the overlap between DIC's and BASF Colors & Effects' activities in the relevant pigments, DIC’s divestment addressed the Commission’s concerns and led them to conclude that the proposed transaction no longer raised competition concerns.
Under the terms of the agreement announced in August 2019, DIC will purchase BASF Colors & Effects on a cash- and debt-free basis for €1.15 billion ($1.41 billion).
Source: European Commission, https://ec.europa.eu.