FTC Blocks Evonik Takeover of Peroxychem
The US Federal Trade Commission (FTC) is seeking to block Germany-based Evonik’s acquisition of US rival Peroxychem from One Equity Partners, saying that it would lead to higher prices. The $625 million deal announced in November 2018 was expected to close in mid-2019.
The US regulatory authority said the proposed acquisition would leave just one other hydrogen peroxide supplier in the Pacific Northwest. In the southern and central US, four suppliers would remain after the merger but Evonik would control nearly half the production capacity, the FTC said:
Both peroxides players said they will fight the US decision. Evonik plans to file a lawsuit against the FTC, and CEO Christian Kullmann said he remains optimistic that the deal will go through.
Evonik said the FTC’s claims fail to recognize current market dynamics, in particular the substantial growth of specialty hydrogen peroxide applications that are PeroxyChem’s focus, and the significant synergies and customer benefits that will arise as a result of transaction.
“It is disappointing that the FTC has taken this step to block the acquisition in the highly competitive hydrogen peroxide industry,” said Kullmann. “PeroxyChem offers products in attractive and high-growth end markets that are complementary to Evonik’s product portfolio.”
Kullmann said the acquisition represents an opportunity for the Essen-based group to expand further into specialty hydrogen peroxide and peracetic acid product, optimize its distribution network, achieve substantial efficiencies and grow production and sales.
At the time of the announcement, Evonik said it expected synergies from the combined business of $20 million by 2022, reflecting the complementary operations and logistics, as well as an expanded product portfolio and access to new technologies.
The globally positioned US manufacturer of specialty peroxygen chemicals based in Philadelphia, Pennsylvania, achieves some 75% of its earnings from applications in the environmental, food safety and electronic semiconductor sectors.
Acquiring PeroxyChem would add eight sites to Evonik’s production bases. The bulk is located in North America, with additional facilities in Europe (Germany and Spain) and Asia (Thailand). Evonik already produces H2O2 at three European sites, including Antwerp, Belgium, Rheinefelden, Germany, and Weissenstein, Austria.
One Equity Partners acquired PeroxyChem – formerly FMC Global Peroxygens – in March 2014. In late November 2015, Evonik announced it would buy the US company’s business in Delfzijl, the Netherlands.
This is not the first time in recent years that the FTC has tried to block a major international chemicals deal, leading some analysts believe the new target, end of 2019, for the closing of the Evonik-PeroxyChem deal may be too optimistic. The acquisition of Saudi Arabian titanium dioxide (TiO2) producer Cristal by US giant Tronox closed in April of this year after two years of litigation with the US authority.