SMC justifies takeover of Holcim Philippines

MANILA, Philippines — San Miguel Corp., the country’s biggest conglomerate, said it is committed to addressing the concerns of the Philippine Competition Commission (PCC) regarding its proposed acquisition of Holcim Philippines.

“We are aware of the concerns raised by the Philippine Competition Commission (PCC) on the company’s proposed acquisition of Holcim Philippines, and are committed to achieving a favorable outcome of the review process,” SMC said yesterday.

We firmly believe that the acquisition of Holcim by San Miguel Corporation, a Filipino company, will be beneficial to consumers, the industry, and our country’s development.

The Mergers and Acquisitions Office (MAO) of the PCC, the government’s anti-trust body, has flagged competition concerns in San Miguel Corp.’s proposed takeover of Holcim Philippines Inc., citing monopoly, increased market power, and potential collusion arising from the merger.

In its review, MAO said the buyout by SMC subsidiary First Stronghold Cement Industries Inc., of Holcim Philippines will result in a substantial lessening of competition in the market for grey cement.

The MAO particularly cited four key areas where competition will decrease. These are in Northwest Luzon, Northeast Luzon, Central Luzon and Greater Metro Manila.

In Greater Metro Manila, Central Luzon, and Northeast Luzon, the transaction results in high combined market shares, allowing Top Frontier to control a majority of the supply in these areas.

In Greater Metro Manila, Central Luzon, and Northeast Luzon, the transaction increases the likelihood of firms to engage in coordinated behavior, PCC also said.

Post-transaction, no new players are likely to or can timely counteract the parties’ market power in Northwest Luzon and that any entrant has little to no ability to constrain the exercise of market power of the parties in Greater Metro Manila, Central Luzon, and Northeast Luzon.

First Stronghold won the bid to acquire Holcim Philippines last year amid the global cement giant’s divestments in Southeast Asia.

At present, Holcim Philippines, subsidiary of global cement giant LafargeHolcim Ltd, manufactures, sells and distributes cement and related aggregates with eight cement facilities in the Philippines.

First Stronghold is wholly owned by San Miguel Equity Investments Inc., which in turn is a subsidiary of SMC—all under Top Frontier Investment Holdings Inc. (Top Frontier).

Top Frontier itself has two cement plants which will commence commercial operations within the next two years. These are Northern Cement and Oro Cemento Industries Corporation.

In terms of control, the MAO review included Northern Cement Corporation (Northern Cement) and Eagle Cement Corporation (Eagle Cement) as part of the Top Frontier group in its market definition and competitive assessment.

“Top Frontier exercises control and influence over Northern Cement’s policies and operations despite its 35 percent minority stake shareholding in the latter. It also looked into interlocking officers and directors between Northern Cement and Eagle Cement, and between Eagle Cement and Top Frontier,” PCC said.

Top Frontier and Holcim Philippines have proposed a set of voluntary commitments before the antitrust commission. Under the PCC’s merger rules, voluntary commitments shall be evaluated by the Commission whether or not they sufficiently address the competition concerns identified by MAO.

SMC also maintained that as a Filipino company, its acquisition of Holcim would be beneficial to consumers, the industry, and the country’s development. 

Other companies that have expressed interest in Holcim are all foreign companies such as Japanese giant Taiheyo Cement Corp., Thailand’s Siam City Cement and Anhui Cement Corp. of China.