European Commission Clears Ashland’s Acquisition of ISP

The Commission concluded that the transaction would not raise competition concerns because the companies' activities are largely complementary and the transaction would not significantly modify the structure of the market.

Aug 22 2011 --- The European Commission has cleared under the EU Merger Regulation the proposed acquisition of the US-based speciality chemicals company International Specialty Products (ISP) by another American company Ashland. The Commission concluded that the transaction would not raise competition concerns because the companies' activities are largely complementary and the transaction would not significantly modify the structure of the market. Ashland’s $3.2 billion purchase of privately held International Specialty Products Inc. is aimed at reinforcing its range of products.

The Commission examined the transaction's impact on the pharmaceutical sector. The main horizontal overlap brought about by the transaction concerns excipients and more precisely binders, that are pharmaceutical additives mainly used to control the release of the active ingredient of medicines.

The Commission found that the binders produced by ISP and Ashland are based on different chemistries and are therefore not particularly close substitutes. In addition, the merged entity would continue to face competition from a number of other suppliers.

The Commission also examined a vertical relationship arising from the proposed transaction as Ashland supplies a chemical (maleic anhydride monomer) which is used by ISP to produce an intermediate product (maleic anhydride/methyl vinyl ether copolymer) that is used downstream by third parties primarily in dental care products such as toothpaste.

The Commission, therefore, concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA)1 or any substantial part of it.

The acquisition was notified to the Commission on 14 July.

ISP produces and supplies speciality chemicals used in personal care, pharmaceutical, beverage, biocides, plastic, tyre and rubber and other applications.

Ashland manufactures and supplies a wide range of products, such as water technologies, functional ingredients, composites, adhesives and automotive chemicals.

Both ISP and Ashland manufacture and supply excipients, which are inactive ingredients in many medecines. Excipients can perform various functions, such as delivering a drug's active ingredient to the intended part of the body, controlling the rate at which the active ingredient is released into the body or insuring the drug’s stability.

The Commission, in 1989, was given the power to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation). Its duty is to prevent concentrations that would significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.

The vast majority of mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).