The Philippine Competition Commission blocked the merger between Universal Robina Corp. and the group of Central Azucarera Don Pedro Inc. and Roxas Holdings Inc.
PCC issued a decision on Feb. 12 prohibiting the merger after finding out that URC’s buyout of its only competitor in the sugarcane milling services market would lead to a sugar monopoly in Southern Luzon.
RHI owns 100 percent of the shares of CADPI, which operates an integrated sugar cane milling and refining plant in Batangas. RHI is also engaged in the trading of raw and refined sugar and molasses.
“A merger-to-monopoly deal is among the most detrimental types of business transactions. The URC takeover removes its only competitor, erodes the benefits of competition for the sugarcane planters and leaves market power at the hands of a single provider in an area,” PCC chairman Arsenio Balisacan said in a statement.
The commission earlier raised competition concerns on URC’s proposed acquisition of CADPI and RHI assets before the entities voluntarily submitted commitments that failed to sufficiently address the competition concerns.
“The prohibition prevents this deal from creating a monopoly in the relevant market that could harm the welfare of the sugar cane planters. It is the duty of the Commission to prevent the creation of monopolies when applying the merger control powers conferred on it by the Philippine Competition Act,” said Balisacan.
URC’s sugar mill is in Balayan while CADPI-RHI’s milling facilities are in Nasugbu. PCC said the monopoly to be created by the merger would substantially lessen competition in the sugar milling services market not only in Batangas province but also in most of Southern Luzon including Cavite, Laguna, and Quezon provinces.
The transaction mainly affects sugarcane farmers in Southern Luzon, but the sugar processed from these facilities serve nationwide demand, including that of Metro Manila, the commission said.
It said farmers might lose the benefits of competition due to the merger, especially in terms of sharing agreements, sugar recovery rates and incentives.
The mergers and acquisitions office of PCC said the transaction would strengthen URC’s market power and allow it to unilaterally reduce the planters’ cut in the sharing agreement.
URC is a major player in a wide range of food-related businesses, including the production of packed foods and beverages, sugar, agro-industrial products, and bioethanol.
Its mills are located in Batangas, Iloilo, Negros Oriental, Negros Occidental, and Cagayan and produce raw sugar, refined sugar and molasses.