CADE approves the operation between Yara and Vale in the fertilizers market
The Administrative Council for Economic Defense (CADE, in its acronym in Portuguese) approved, without restrictions, the merger regarding the acquisition of the industrial complex of Vale Cubatão Fertilizantes by Yara Group.
The acquisition, which aims to expand the activities of Yara Group in the chemical industry, had already been approved by the General Superintendence (SG, in its acronym in Portuguese) on March 20. However, due to a request issued by Commissioner João Paulo Resende, CADE’s Administrative Tribunal decided to call the merger. Mr. Resende based his request upon information regarding that Petrobras' nitrogen fertilizer production plants, in the Brazilian States of Bahia and Sergipe, would be paralyzed until the end of the first semester of 2018.
According to Mr. Resende, the information raised concerns about a change in the scenario upon which the SG relied on as a framework for the computation of the possible and probable abuse of market power in the production of ammonia, ammonium hydroxide, and hydrogenated basic fertilizers. There would also be concerns regarding a possible downstream integration between the Integrated Port Terminal Luiz Antônio Mesquita (TIPLAM, in its acronym in Portuguese) and the assets acquired by Yara.
However, in the vote that conducted the merger approval, Commissioner Mauricio Oscar Bandeira Maia argued that a stoppage of the Petrobras’ plants is neither certain nor causes major changes in the market shares of the companies involved in the transaction, considering the markets of ammonia, ammonium hydroxide, and nitrogen fertilizers. Mr. Bandeira Maia stated that there are indications that Petrobras is planning to make investments capable of enabling the imports of products through the Port of Aratu, in the Brazilian State of Bahia.
The commissioner considered that the low idle capacity of TIPLAM would make it a non-feasible alternative to the customers of ammonia in the Northeast region of Brazil, highlighting the lack of relation between the merger and the possibility of stoppage of the Petrobras plants. Furthermore, Mr. Bandeira Maia reasoned that there are no concerns regarding the downstream integration, given that the transaction would generate a de-verticalization in the market. The Administrative Tribunal followed his understanding unanimously.