BRUSSELS—A European Union Commission has granted conditional clearance for German chemical giant BASF S.E. to acquire Solvay S.A.'s nylon business.
In a Jan. 18 statement, the commission said the approval was conditional on the "divestiture of a remedy package."
"Our decision will allow for the creation of a significant European player in this market because the commitments offered by BASF and Solvay ensure that the merger will not lead to higher prices or less choice for European businesses and, ultimately, consumers," said commissioner Margrethe Vestager, in charge of competition policy.
The decision followed an in-depth review of the proposed transaction by the EU, which had expressed its concerns about a monopoly over the supply of certain key materials, including adiponitrile (AND), hexamethylene diamine, adipic acid, hexamethylenediamine adipate salt, and nylon 6/6 base polymer in the European Economic Area (EEA).
The commission also was concerned that the acquisition would lead to a "reduction of the number of suitable suppliers and likely price increases" in a number of markets related to the nylon industry in the region.
To address the concerns, BASF and Solvay pledged to divest Solvay's facilities at Belle-Etoile and Valence in France, Gorzow, Poland, and Blanes, Spain, to "a single suitable buyer." These facilities produce hexamethylene diamine, hexamethylenediamine adipate salt, nylon 6/6 base polymer, nylon 6/6 engineering plastics and nylon 6 3D printing powder.
Additionally, a production joint venture would be created in Chalampe, France, between the merged entity and the buyer of the divested assets, for the production of adipic acid.
BASF also undertook to provide long-term supply agreements for ADN to meet the divestment business' requirements.
These commitments, said the EU, "fully remove the overlap between BASF and Solvay in the markets where the Commission had identified competition concerns."
BASF said in a statement that the approval was "an important milestone for the transaction."
The deal is expected to close in the second half of 2019 after all remaining closing conditions, including the sale of a remedy package to a third party, have been fulfilled. However, pending approval of the transaction, the first steps in the divestment process already were taken in the fourth quarter of 2018, BASF said.
The nylon businesses in the Americas and in Asia are not affected by the commitments.
BASF said the approved deal will achieve its "strategic objectives" to strengthen its nylon 6/6 business significantly.
"The acquisition will complement BASF's engineering plastics portfolio, enhance the access to key growth markets in Asia and South America as well as strengthen the value chain through backward integration into key raw materials such as ADN," the company added.