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India – CCI Approves SCM Soilfert’s Acquisition Of Mangalore Chemicals And Fertilizers Limited.

12 September, 2014

 

 

On July 30, 2014, CCI approved the proposed acquisition by SCM Soilfert Limited (‘SCM’) of Mangalore Chemicals and Fertilizers Limited (‘MCFL’). SCM is a subsidiary of Deepak Fertilizers and Petrochemicals Corporation Limited (‘DFL’) which is a person acting in concert with SCM as provided under the SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 2011 (‘Takeover Code’).

 
The proposed scheme involved the acquisition of shares of MCFL by SCM in two steps: (i) the acquisition of 0.8% of the equity shares in MCFL by way of open market transactions; and (ii) the acquisition of up to 26% of the equity share capital of MCFL by way of an open offer under the Takeover Code. The Takeover Code was triggered in this transaction because SCM already held 24.46% of the equity shareholding in MCFL which had been acquired in 2013.

 
CCI noted that in the chemicals segment, the product portfolios of MCFL and DFL were different and none of the products of either company was substitutable. However, CCI noted that there were certain overlaps in the fertilizer segment and therefore it restricted the assessment of the proposed acquisition to the overlapping products in the fertilizer segment. CCI stated that it is possible to delineate the fertilizer sector on the basis of nutrients or specific products. In case the market is delineated on the basis of nutrients it may be further narrowed down to secondary nutrients or micro-nutrients.

 
CCI noted that the fertilizer sector in India is a regulated industry due to its importance to the agriculture sector. The Fertilizer (Control) Order, 1985, which was issued by the Government of India details the regulatory framework for the manufacture, sale, pricing, import, and quality of control of fertilizers in India. The Department of Fertilizers (‘DOF’) under the Ministry of Chemicals and Fertilizers is tasked with ensuring that there is adequate and timely availability of fertilizers at affordable prices in order to maximize agricultural production in the country. Additionally, CCI also noted that one of the primary functions of the DOF is to monitor the pricing of fertilizer output in the country. Further, MCFL and DFL were mainly involved in trading fertilizer products and only manufactured a few fertilizer products. There were a number of competitors present in the market for the products that are traded by MCFL and DFL. CCI approved the proposed acquisition as it observed that it was not likely to cause an appreciable adverse effect on competition in India since there were only a few overlaps, entry into the market for trading in imported fertilizers was relatively easy and there are numerous competitors in the market. In light of the above, CCI found no grounds for any likelihood of any appreciable adverse effect on competition in India (‘AAEC’) and granted its approval.

 

AZB

 

For further information, please contact:

 

Zia Mody, AZB & Partners
zia.mody@azbpartners.com

 

Abhijit Joshi, AZB & Partners 
abhijit.joshi@azbpartners.com

Shuva Mandal, AZB & Partners 
shuva.mandal@azbpartners.com

 

Samir Gandhi, AZB & Partners
samir.gandhi@azbpartners.com

Percy Billimoria, AZB & Partners 
percy.billimoria@azbpartners.com

 

Aditya Bhat, AZB & Partners 
aditya.bhat@azbpartners.com

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