The European Commission on Tuesday approved the proposed acquisition of a group of chlorovinyls businesses belonging to Ineos by International Chemical Investors Group (ICIG). In parallel with the clearance decision, the commission has also approved ICIG as suitable buyer for the divestments offered by Ineos and Solvay to obtain the clearance of their joint venture in the suspension polyvinyl chloride (S-PVC) market. The decision clears the way for the formation of Inovyn on 1 July 2015.
The Ineos’ chlorovinyls businesses to be acquired by ICIG include the production and supply of S-PVC, sodium hypochlorite, potassium hydroxide (KOH) and other related products. The transaction includes production facilities owned and operated by Ineos in Belgium, France, Germany, Netherlands and the United Kingdom, which Ineos committed to divest to obtain the commission’s clearance of the Ineos and Solvay joint venture Inovyn. The assets being acquired by ICIG will form a new chlorvinyls platform within the company, which will trade under the Vynova Group name. It will have sales in exesss of €850 million ($955 million). ICIG anticipates closing of the transaction on 1 August 2015.
The companies’ activities mainly overlap in KOH, which is used in the production of de-icing liquids, soaps, biodiesel and fertilizers. The commission concluded that the transaction would lead to less concentration in the market for KOH as a result of the transfer of part of the KOH business previously operated by Ineos, the market leader, to an independent competitor, ICIG. Moreover, a number of other players would remain active in the market.
“We are delighted to have achieved this very important milestone and to be able to move forward with Inovyn. The joint venture will bring together the strengths of the respective chlorvinyls activities of Ineos and Solvay to create a world scale business that will be better able to serve its customers and rapidly respond to changing European markets,” said Chris Tane, CEO Ineos ChlorVinyls and future CEO of Inovyn. Inovyn, to be headquartered in London, will have pro-forma sales of more than €3 billion with assets across 18 sites in Belgium, France, Germany, Italy, Norway, Spain, Sweden and the UK.
In May 2014, the commission approved the clearance of Inovyn subject to conditions. The commission had concerns that the transaction would remove Ineos’ strongest competitor, Solvay, in the commodity S-PVC market in northwest Europe. As a result, the merged entity would have faced insufficient competition from the remaining, much smaller, players and would have been able to raise prices. Additionally, for the market for bleach in Belgium, Netherlands and Luxembourg, the transaction would have created a market leader with a market share above 60%, with none of the remaining players able to sufficiently constrain the merged entity to avoid price increases for customers.
In order to address the commission’s concerns, Ineos and Solvay offered to divest the following Ineos assets before implementing the joint venture: the S-PVC plants at Mazingarbe, France; Wilhelmshaven, Germany; and Beek Geleen, Netherlands; the membrane electrolysis cellroom, the ethylene dichloride/vinyl chloride monomer (EDC/VCM) plant and related production assets, including sodium hypochlorite production assets, at Tessenderlo, Belgium; the VCM plant at Wilhelmshaven; and the chlorine cell room and the EDC plant located at Ineos’ chemical site at Runcorn, UK.
In the course of the divestment process, Ineos and Solvay proposed ICIG as their preferred buyer for the Ineos remedy assets. After the commission raised preliminary concerns related to certain conditions of the proposed transfer, a number of modifications and additions were included in the proposal. The Runcorn, UK chlorine plant will be placed in a 50-50 joint venture between Inovyn and Vynova. The acquistion will also include a portion of the KOH business at Tessenderlo, with Vynova supplyign Inovyn under a toll manufacturing arrangement for the proportion of the KOH business that Inovyn will retain. Meanwhile, Vynova will liaise with ICIG’s company PPC to align the marketing strategy for KOH from its newly converted membrane plant at Thann, France, scheduled to startup during the second half of this year.
By Natasha Alperowicz