Mexico's antitrust authority has blocked Mexican PVC and specialty chemicals maker Mexichem SAB de CV's planned acquisition of PVC resins producer Polycid SA de CV from Mexican chemical company Cydsa SAB de CV.
Anipac, Mexico's plastics trade group, applauded the June 4 decision by the Federal Competition Commission (CFC). Anipac said the proposed deal would give Mexichem a monopoly on PVC resin supplies in the country.
We are still worried, because the commission has to respond to Mexichem's and Cydsa's appeals against the finding, said Alfredo LÃ³pez Machorro, Anipac's managing director. If the Mexichem-Cydsa deal were allowed, it would mean a shortage of credit, [resin] availability and services for Mexico's PVC processors, he said.
Enrique Ortega, Mexichem's investment relations director, said earlier that the company will appeal the CFC ruling. Cydsa said on the Web site of the Mexican Stock Exchange that it too will challenge the decision, which is the authority's second snub of the two companies in the past two weeks.
In late May, the commission refused to sanction Mexichem's proposed purchase of plastic pipe maker Plasticos Rex SA de CV from Cydsa, saying that the transaction would be a risk for the market.
Cydsa of Garza García, near Monterrey, announced in April 2008 that Mexichem had proposed that Cydsa exchange Polycid and Plasticos Rex for a Mexichem caustic soda and chlorine plant in Santa Clara, Mexico. As part of the deal, Cydsa would receive a cash payment, to be determined after the exchange.
In reality, this is just one objection by [the government] and applies to the whole package, Ortega said. If one transaction is not authorized, the whole deal will be canceled. But Ortega said Mexichem has the technical elements to prove that the CFC came to the wrong conclusions.
Mexichem said in a 2008 stock exchange filing that if this agreement were approved, it would permit the PVC productive chain in Mexico to maintain its competitiveness with other companies in North America, despite being at a disadvantage in terms of integration and size. The company argued that the deal represented an opportunity for Mexichem to confront its competition through operational efficiencies and synergies that would give long-term viability to the chain.
Headquartered in Mexico City, Mexichem has spent as much as $470 million in acquisitions and expansion across the Americas in the past two years, Ortega said.
According to its Web site, the CFC is comprised of five commissioners appointed by the president of Mexico to 10-year terms. The authority's mission is broadly similar to that of the U.S. Federal Trade Commission.