NERA’s Role in BASF’s Acquisition of Solvay’s Polyamide Business

NERA Economic Consulting is pleased to have advised BASF in its acquisition of Solvay’s polyamide business, leading to what the European Commissioner for Competition Margrethe Vestager called “the creation of a significant European player”. The transaction was conditionally cleared by the European Commission on 18 January 2019, following an in-depth investigation.

The Situation

On 19 September 2017, BASF announced that it had agreed to purchase from Solvay its polyamide business. The transaction was notified to the Commission on 22 May 2018.

The polyamide (also known nylon) value chain stretches from Adiponitrile (“ADN”) at the top to nylon 6.6 engineering plastics at the bottom of the chain. Before the transaction, both merging parties are present at multiple levels of the chain, although BASF: (i) sells only a small part of its production of intermediaries in the merchant market; and (ii) does not own any ADN production capacity.

In the light of these facts, the Commission was concerned that the transaction, as originally notified, would give rise to horizonal and vertical effects at multiple levels of the nylon value chain in the European Economic Area.

NERA's Role

BASF retained NERA to provide economic advice throughout the transaction’s notification to and review by the Commission. NERA’s advice covered issues in market definition, competitive effects and the suitability of remedies. With regard to competitive effects, NERA analysed in particular the overall impact of a potential input foreclosure strategy, taking into account the idiosyncrasies of the nylon value chain.

The Result

Following an in-depth investigation, the Commission conditionally cleared the transaction on 18 January 2019. The remedies accepted by the Commission to remove the competition concerns identified include the divestiture of several of Solvay’s assets downstream of ADN to a single suitable buyer and a long-term ADN supply agreement with it.

For more details, please find the press release of the European Commission here.