MOC Approves Mitsubishi Takeover of Lucite with Conditions     

The Ministry of Commerce of China (MOC) said on April 24th it had approved Japan-based Mitsubishi Rayon Co.'s acquisition of U.K based Lucite International Group with conditions.
    Mitsubishi Rayon on December 22nd, 2008 applied to MOC for approval of its acquisition proposal of Lucite. After reviewing the proposal, the MOC said the deal would harm normal competition in China's methyl methacrylate (MMA) market.
    A tie-up between Mitsubishi Rayon and Lucite would bring the combined company a 64% MMA market share in China, far exceeding second-largest Jilin Petrochemical Co. and Heilongjiang Longxin Chemical Co., Ltd., the No.3, it said. With such dominance, Mitsubishi Rayon with Lucite would have the capability to squeeze and eliminate other players in the domestic MMA market, the ministry concluded.
    Also, as Mitsubishi Rayon engages in the MMA downstream business, it would have had the capability to block supply to competitors in downstream sector upon the completion of the deal, it said.
   Considering that the two sides have proposed solutions to offset such negative effects on the Chinese MMA market in a required timeframe, the MOC decided to accept their commitments and approve the proposed acquisition, conditional on the following undertakings.

1. Production capacity divestment
Lucite International (China) Chemical Industry Co., Ltd. (Lucite China) must spin off half of its annual MMA capacity of 93 000 tons in China to one or several non-connected third party buyers within five years, and will have to sell MMA at cost price to the third party in China.
   If Lucite China fails to divest the 50% capacity in five years, the MOC will be entitled to appoint an independent trustee, upon agreement by Lucite and Mitsubishi Rayon, to sell 100% stake of Lucite China to an unattached third party buyers.
   The spin-off should be completed within six months upon completion of the proposed deal. If Lucite China applies for postponement on reasonable grounds, MOC is entitled to extend the plan for another six months.

2. Independent operation
Lucite and Mitsubishi Rayon must have their MMA business in China operate independently during the period of time from the close of the proposed deal to the aforementioned capacity peel-off.
   During independent operation term, the two parties concerned shall continue selling MMA in China on a competitive basis, and they shall not be allowed to exchange competitive information about each other's pricing, customers or other relevant information.

3. No additional capacity in five years
Without prior approval by the MOC, the combined company shall not be allowed to acquire or build plants for MMA, PMMA (polymethyl methacrylate) or cast sheet plants in China within five years after the proposed acquisition is closed.
   Mitsubishi Rayon now operates a joint venture plant for 7 000 t/a butyl metharylate (BMA) in Zhangjiagang of Jiangsu province, the largest capacity of its kind in China.