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PCC starts further review of URC-Roxas Holdings deal

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UNIVERSAL ROBINA Corp. (URC) on Thursday said it is acquiring the sugar milling and refining assets of Roxas Holdings, Inc.’s (RHI) subsidiary in Nasugbu, Batangas.

At the same time, the Philippine Competition Commission (PCC) said it is conducting a further review of the URC-RHI deal, after an initial market investigation conducted by its Mergers and Acquisitions Office (MAO) showed the deal may affect the local sugar industry.

In a statement, the Gokongwei-led URC said it will acquire all buildings, improvements, machineries and equipment, and laboratory equipment, owned by RHI and its subsidiary Central Azucarera Don Pedro, Inc. (CADPI), as well as the land on which these assets are located. The refinery and milling plant is in Barangay Lumbangan, Nasugbu in Batangas.

“Together with URC-Balayan, we believe that URC’s acquisition of the milling and refining assets of CADPI will create synergies in the sugar industry in Batangas that will benefit all stakeholders — sugarcane farmers, sugarcane workers and the communities,” URC Chairman Lance Y. Gokongwei was quoted as saying.




In a separate statement, RHI Executive Vice President and Chief Finance Officer Celso T. Dimarucut said the sale of the Batangas assets will “significantly reduce the group’s leverage as proceeds will be used to pare down debt.”

Both RHI and URC did not disclose the financial details of the deal.

RHI Chairman Pedro Roxas expressed hope the deal will be approved by the PCC, as well as creditor banks.

“We are hopeful that we can get the necessary approvals before the start of the next crop year,” Mr. Roxas was quoted as saying.

However, the PCC said it decided to carry out a Phase II review to “look into whether the URC-RHI transaction is likely to lead to a substantial lessening of competition” in the sugar industry.

URC and RHI had filed the notification notice with the PCC on July 6. The anti-trust body started its Phase I review on July 9, and announced a Phase II review on Thursday. The PCC said the Phase II review, which will be conducted within 60 calendar days, only means the transaction needs a “more detailed” analysis.

Noting both URC and RHI operate in Batangas, the anti-trust body said the Phase II review will focus on whether the URC-RHI deal will lead to the “substantial lessening of competition in the following markets: (1) provision of sugar cane milling services in the provinces of Batangas, Cavite, Laguna and Quezon; (2) provision of raw sugar refining services; (3) raw sugar; (4) refined sugar; and (5) molasses.”

In particular, the PCC said the MAO will look into whether there will be an “increased likelihood that competitors in such markets will coordinate their behavior or strengthen existing coordination in a manner that harms competition.”

“The MAO likewise seeks to assess whether the transaction enhances the ability and incentive of the parties to engage in foreclosure of competitors, in the markets where vertical relationships between the parties’ operations are present, such as, but not limited to, raw sugar, refined sugar, molasses, and the provision of raw sugar refining services in order to conduct a more detailed inquiry,” the competition watchdog said.

URC operates six sugar cane mills nationwide, namely URC-Balayan in Batangas; URC-Passi in Iloilo; URC-Tolong and URC-Ursumco in Negros Oriental; URC-Sondenco in Negros Occidental; and URC-Carsumco in Cagayan.

RHI, which is described as the largest integrated sugar business in the country, also manages sugar miller Central Azucarera de la Carlota, Inc., ethanol producers Roxol Bioenergy Corp. and San Carlos Bioenergy; and RHI Agri-business Development Corp. — J.C.Lim and A.G.A.Mogato