Published: 12 September 2023

A REGIONAL regulatory body has blocked Dutch paint and coatings firm, AkzoNobel N, from acquiring a stake in the Mauritian and South African subsidiaries of Japanese chemical firm, Kansai Paint Co Ltd (KPCL), citing closeness in business operations.

KPCL owns and operates two coating and paint firms, Kansai Plascon East Africa Proprietary Limited (KPEAPL), domiciled in Mauritius and the South African-based, Kansai Plascon Africa Limited (KPAL).

KPEAPL operates in the east African region, while KPAL operates in the southern region.

Outside South Africa, KPAL has four manufacturing plants, one in Malawi, another Zambia and two in Zimbabwe.

"The Comesa Competition Commission has prohibited the proposed acquisition by AkzoNobel NV of the decorative coatings business of Kansai Plascon East Africa Proprietary Limited and Kansai Plascon Africa Limited in Eswatini, Zambia and Zimbabwe," the commission's chief executive officer Willard Mwemba said in a statement.

"The merging parties are each other's closest competitors in terms of price and quality, and the merger would have created significant market share accretion and reduced choice in the market for decorative coatings in these member States. The commission held that the remedies offered by the merging parties were not sufficient to address these concerns."

KPAL operates in Zimbabwe through its subsidiary, Astra Industries Limited, the largest paint and protective coatings manufacturer in the country with 45% market share and exports some of its output to the region.

The commission observed that a distinction can be made between premium paints and medium-to-economy paints.

"The merging parties' brands, in particular Kansai's Plascon brand, and AkzoNobel's Dulux in the southern Africa region and Sadolin in the eastern Africa region are consistently recognised as premium paints in the majority of the member States, the exception being the Indian Ocean islands," Mwemba said.

"The merger would have resulted in the creation and/or strengthening of market power in the broad market for decorative coatings in the relevant geographic clusters identified, which would have increased the merging parties' ability to engage in unilateral conduct post-merger without significant competitive constraints from remaining players on the market."

The commission added that the merged entity would also have benefited from a combination of two of the strongest paint brands on the common market, in addition to a combination of significant balance sheets.

"As a result of the popularity of their brands and perceived quality level, there would be no effective substitutes to which customers and/or retailers could reasonably turn to if the merged entity were to engage in abusive conduct (exploitative or exclusionary)," Mwemba said.

"Pre-merger, there is evidence that the merging parties were each other's closest substitutes and the parties' behaviour and strategy on the market would have been constrained by each other. This important competitive pressure would have been lost as a result of the merger."

AkzoNobel already operates in South Africa, Eswatini, Mauritius and Zambia, meaning that purchasing both KPEAPL and KPAL would have created an uncompetitive market in the coatings and paint space.

AkzoNobel operates in South Africa through its subsidiaries AkzoNobel South Africa Limited and ICI Dulux.

In Eswatini, it operates Dulux Swaziland Limited and both Coloris Limited and Mauvillac Industries Limited in Mauritius.

In Zambia, the Dutch firm operates Dulux Zambia (2005) Limited.

AkzoNobel had a balance sheet of US$15,77 billion as of the end of its financial year ended December 2022, compared to KPAL's total assets equivalent of US$2,16 billion as of March.
- newsday

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