A proposed paint deal between Kansai Paint, the manufacturer of Plascon, and Akzo Nobel (AkzoNobel), the manufacturer of Dulux-branded paint products, was scuppered by the Competition Commission in a bid to protect decorative coatings prices.
The deal was announced in June as AkzoNobel sought to further strengthen its African footprint after reaching an agreement with Japanese, Osaka-based Kansai Paint to acquire its paints and coatings activities in the region.
The commission, in a statement said on Wednesday that it had prohibited a proposed deal by AkzoNobel, an Amsterdam-based company that manufactures chemicals and chemical products, to acquire Kansai Plascon Africa and Kansai Plascon East Africa as it was likely to result in a substantial prevention or lessening of competition.
The commission said it found that the proposed merger would result in a substantial lessening of competition in the market for the manufacturing and supply of decorative coatings.
“This is because the proposed merger combines the largest and second-largest manufacturers of decorative coatings who manufacture the well-known Plascon- and Dulux-branded paint products to create a dominant firm with a considerable market share. The commission also found that the merging parties are close competitors in terms of price, quality, and product range, and the merger would remove competitive rivalry between two notable brands, thus reducing consumer choice,” it stated.
In addition, the commission found that the proposed merger was likely to result in substantial input foreclosure concerns relating to the manufacturing and supply of colourants as the merging parties had both the ability and incentives to foreclose some of their competitors’ access to colourants.
The merging parties did not provide evidence of merger-specific technological, efficiency, or another pro-competitive gain that would be greater than and offset the effects of the prevention or lessening of competition arising from the proposed transaction, nor substantially weighty public interest commitments that would outweigh the competition concerns, it said.
“The merging parties had also not put up remedies likely to adequately address the anti-competitive effect of the merger,” the commission said.
At the time of the deal, AkzoNobel said completion of the deal, which was subject to regulatory approvals, was expected during the course of 2023.
“Present in 12 countries in Africa, Kansai Paint has regional consolidated revenue of around €280 million (R5 billion). The transaction included the Plascon brand, which has more than 100 years of heritage in South Africa,” it said.
AkzoNobel, the acquiring group which is listed on the Euronext Amsterdam Stock Exchange, in South Africa controls the Akzo Nobel Powder Coatings South Africa; Akzo Nobel South Africa; ICI Dulux; and P J A (South Africa).
The commission said AkzoNobel manufactured Dulux coatings used in various segments, which were primarily divided into decorative coatings and industrial coatings, which in turn include automotive and speciality coatings, marine and protective coatings, wood finishes, coil coatings, and powder coatings.
In South Africa, AkzoNobel had three manufacturing plants – two located in Alberton and Vanderbijlpark in Gauteng and one, its largest, in Umbogintwini, KwaZulu-Natal.
AkzoNobel’s South African manufacturing plants produces decorative coatings and industrial coatings products sold in South Africa, as well as several products that are exported to other African countries.
AkzoNobel’s primary target firms were South Africa’s KPAL, which manufactures Plascon-branded paint products, and Mauritius’s KPEA, both subsidiaries of Kansai Paint.
In South Africa, decorative coatings contributed the largest portion to net sales within KPAL. In South Africa, KPAL had four manufacturing plants – two located Krugersdorp and Clayville in Gauteng, one in Mobeni, KwaZulu-Nata and one in Gqeberha, Eastern Cape. Outside of South Africa, KPAL had four manufacturing plants – one in Malawi, one in Zambia, and two in Zimbabwe. KPAL also manufactured colourants.
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