Completed acquisition by Dadco Alumina & Chemicals Limited of sole control of Aluminium Oxid Stade GmbH

Affected market: alumina

No. ME/1245/04

Please note that the full text of the decision can be downloaded from the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, assessment and decision.

Please note that square brackets indicate figure excised at Dadco's request or exact figure replaced by a range at Dadco's request.

The OFT's decision on reference under section 22 given on 29 October 2004

PARTIES

Dadco Alumina & Chemicals Limited (Dadco) is a privately owned investment, manufacturing and trading group based in Guernsey.  In 2003, Dadco's turnover was approximately [ ].

Aluminium Oxid Stade GmbH (AOS) is an alumina refinery in Stade near Hamburg in Germany.  It produces metallurgical (or smelter grade) alumina and chemical grade alumina (including commodity alumina hydrate).  Prior to the merger, AOS was 50 per cent owned by Dadco and 50 per cent owned by Hydro Aluminium Deutschland GmbH (HAD), a company in the Norsk Hydro Group.  AOS did not make sales to third parties.  Instead, it operated as a production joint venture, supplying product to Dadco and HAD, which together paid internal costs to AOS of around [ ] in 2002.  AOS's UK turnover in the year to December 2003 was [ ].

TRANSACTION

On 30 June 2004, Dadco acquired HAD's interest in a German based alumina business consisting of a 50 per cent share in AOS (the other 50 per cent was already held by Dadco), HAD's related chemical grade alumina business and a 10 per cent share in Halco (Mining) Inc.  As a result of the transaction, therefore, Dadco acquired sole control of AOS.

JURISDICTION

As a result of this transaction, Dadco and AOS/HAD's related chemical grade alumina business have ceased to be distinct.  The parties overlap in the supply of smelter grade alumina and chemical grade alumina (including commodity alumina hydrate).  The share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met in respect of the supply of commodity alumina hydrate in the United Kingdom (the UK).  The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.

ASSESSMENT

Prior to the merger, Dadco and HAD separately sold to customers the commodity alumina hydrate that each acquired from AOS.  Some third parties have estimated Dadco's post merger EEA share of supply to be as a high as 51.5 per cent.  However, the question at hand is whether the merger has resulted, or may be expected to result, in a lessening of competition that is substantial within any market or markets in the UK. 

Dadco states that, for UK customers, its share is [20-30] per cent.  If correct, this would indicate that prior to the merger Dadco and HAD were not as strong a constraint on each other in the UK as elsewhere in the EEA.  This would accord with the majority of third party views expressed to the OFT where UK customers generally expressed no adverse opinion on the merger whilst some customers based outside the UK appeared concerned.  In this respect the OFT must assess the impact of the merger on competition within the U.K.  Whilst generally, where the OFT finds the competitive constraint to be EEA wide, views of customers based within the UK as well as abroad may be valid, it is also necessary to ascertain the closeness of the competitive constraint represented by the parties within the UK. 

The evidence available to the OFT supports the view that HAD is less of a constraint in the UK than the EEA share data would suggest.  Some UK customers were unaware that pre-merger Dadco supplied commodity alumina hydrate and the majority of UK customers consider that they have a choice of a number of existing commodity alumina hydrate suppliers (Dadco, Alcoa, Alcan, MAL).  Customers could also turn to potential suppliers such as Glencore, which has indicated that it could supply commodity alumina hydrate into the UK with ease from its plant in Aughinish.  Overall, the weight of the above evidence indicates that there are no substantial competition concerns in the supply of commodity alumina hydrate.

Consequently, the OFT does not believe that it is or may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the UK.

DECISION

This merger will therefore not be referred to the Competition Commission under section 22(1).

 

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