Fears persist over Swedish chemicals deal

Date: 13/07/2000

By Peter Chapman

COMPETITION Commissioner Mario Monti's decision to clear a controversial chemicals sector take-over by Swedish investment management company Industri Kapital has only "slightly lessened" concerns about a subsequent deal involving the firm, according to Commission sources.

The warning follows this week's ruling clearing the company's plan to acquire the Norwegian chemicals and explosives firm Dyno, but with a string of conditions attached.

The Commission launched an in-depth probe into the deal in February, stating that it raised a raft of concerns over potential overlaps in the Scandinavian markets - particularly Finland - for resins used for bonding or impregnating wood and other materials, and in formaldehyde, a gas used for the production of resins, because Industri Kapital already owned firms operating in these sectors.

But the deal was allowed to go ahead after Industri Kapital agreed to sell Dyno's formaldehyde and resin plant in Kitee, Finland, or a similar plant in Hamina, and to divest some of its investments in two companies which produce food storage and transportation systems.

Sources say the Swedish firm could face demands for even more concessions to win clearance for its plans to buy Swedish speciality chemicals and flooring firm Perstorp. Monti announced earlier this month that he was launching a detailed investigation into the take-over, citing fears about Industri Kapital's ultimate control of the Nordic resin markets. This probe is likely to be concluded in November.

Officials say the Commission's concerns about the Dyno deal are very similar to those raised by the Perstorp take-over. But in the latter case, its worries go beyond the Finnish market which caused most problems in the Dyno tie-up. This means the divestments announced this week by Industri Kapital will only address some of the Commission's worries. "This lessens our concerns - but only partly," said a spokeswoman for Monti. "With the Perstorp deal, there are other concerns in other geographical markets including Sweden and Austria."

The timing of the two deals means that merger officials had no choice but to examine them separately. Bizarrely, this meant that its investigation into the second deal - the take-over of Perstorp - was launched on 7 July on the uncertain assumption that the first would go ahead as planned.

Industri Kapital deputy chief executive Harald Mix insists his firm will continue to cooperate with the Commission. "It is not unusual that acquisitions creating companies with strong market positions are subject to in-depth EU investigations," he added.

Industri Kapital is a private equity investment firm managing funds worth more than h2 billion which has acquired over 35 European companies since 1989.