Antitrust Lawyer Blog Commentary on Current Developments

FTC BLOCKS BASF/CIBA $5.1 BILLION MERGER

On April 2, 2009, the Federal Trade Commission (“FTC”) required BASF, a world leading chemical company based in Germany, to divest assets related to two high performance pigments of Ciba Holding Inc (“Ciba”) in order for BASF’s proposed $5.1 billion acquisition of Ciba to proceed after the statutory public comment period of 30 days. It issued a consent order that would significantly reduce remedy the anticompetitive impact of the proposed transaction in the bismuth vanadate and indanthrone blue (two high-performance pigments) markets.
The FTC consent order requires BASF to sell all assets, including the intellectual property related to bismuth vanadate and indanthrone blue to an FTC-approved buyer within six months. High performance pigments are used to provide color for products in the automobile, manufacturing, and plastics industries. These pigments are also more durable and are suited for products that are exposed to the sun and weather. According to the FTC, there are no other viable substitutes for bismuth vanadate (a bright yellow-green pigment) and indanthrone blue (a blue-red pigment).

The FTC contends that the markets for both pigments are highly concentrated. The proposed merger would give BASF/Ciba 60% market share in the bismuth vanadate market and more than a 50% market share in the indanthrone blue market. It also would reduce the number of competitors from four to three in the bismuth vanadate market and from three to two in the indanthrone blue market. This would give BASF/Ciba unilateral market power and would increase the likelihood of collusion with the remaining firms in both markets.

Specifically, the consent order requires BASF to sell all of Ciba’s bismuth vanadate production assets in Europe to an FTC approved buyer. The consent order requires BASF to allow the buyer to continue to use Ciba’s production facilities of indanthrone blue until the acquirer is prepared to shift Ciba’s production facilities into its own facilities. In addition, the consent order requires BASF to provide other relief to the acquirer, such as supply agreements and protections for confidential information, and to facilitate the hiring of key employees. The order also allows the FTC to appoint an interim monitor to ensure that BASF complies with all of its obligations. Finally, the FTC may appoint a divestiture trustee to sell the relevant assets if BASF fails to sell them within six months. The Commission vote to accept the complaint and proposed consent order and place copies on the public record was 4-0.

Robert Doyle
(202) 589-1834
rdoyle@dbmlawgroup.com