Following an in-depth review, the European Commission has accepted divestment proposals put forward in March by would-be PVC joint venture partners Ineos and Solvay and approved the asset merger that will create Europe's largest PVC producer by far.

Globally, the new company would rank third behind Shin-Etsu Chemical of Japan and the U.S. arm of Formosa Plastics.

As the two companies already are Europe's market leaders, the Commission
had expressed concern about the impact the creation of such a large and powerful player would have on competition in the sector.

In their successful attempt to accelerate the approval procedure, Ineos and Solvay in March proposed to sell their suspension PVC plants at Beek, the Netherlands, Mazingarbe, France, and Wilhelmshaven, Germany, in addition to chlorine and ethylene dichloride (EDC) assets in Tessenderlo, Belgium, and Runcorn, UK.

Initially, they had proposed to divest only Ineos' two plants in Germany, at Wilhelmshaven and Schkopau. The latter facility, acquired by the now Switzerland-based company from Dow Chemical, is now outside the disposal package.

Together the PVC production facilities up for grabs have capacity for an estimated 770,000 t/y - about a quarter of total output.

Without the divestments, the Brussels competition authority said the 50:50 joint venture would be in a position to raise prices in the northwest European S-PVC market and for sodium hypochlorite (bleach) in the Benelux. The two players together control 60% of the Benelux bleach market. Their only important competitor would be AkzoNobel of the Netherlands.

The purchaser of the divested assets would take possession of a fully-integrated S-PVC business, the Commission said. It added that the buyer will enter a joint venture agreement with the merged company for production of chlorine at Runcorn.  

The prospective partners have agreed not to finalize their merger deal until binding sales agreements are signed.

"The proposed commitments will ensure that the transaction will not result in higher prices to the detriment of businesses and consumers in Europe," said EU competition commissioner Joaquin Almunia.

The letter of intent between the prospective joint venture partners foresees Ineos acquiring Solvay's share of the jv for five and a half times its mid-cycle recurring earnings before interest, taxes, depreciation and amortisation (REBITDA) four to six years after the merger is concluded. Solvay also would receive cash payments of €250 million.