The Comesa Competition Commission (CCC) has ordered Dutch paint maker AkzoNobel and Japan’s Kansai Plascon Paints to divest the Sadolin paint brand to an independent competitor as a condition for the approval of their proposed merger in the East Africa market, including Kenya.
AkzoNobel in June last year struck a deal to buy the assets of the rival Kansai Plascon’s business in Kenya, Uganda, Tanzania Burundi, and the rest of Africa in a bid to strengthen its footprint in the region.
The takeover of Kansai Plason’s assets in East Africa is however now subject to a condition that it divests its Sadolin paint brand to an independent or third-party competitor based in Uganda.
“In the geographic cluster affecting Burundi, Kenya, Rwanda, and Uganda, the merger is approved subject to the parties divesting of the Sadolin brand to a buyer who must be capable of ensuring continued sales of the brand in Uganda for the foreseeable future,” the regulator said.
“Until the approval by the Commission, the parties commit to ring-fence their respective business in the common market. The buyer of the divested brand must not have any structural relationship with the merging parties.”
It said the divestment shall include all the required licences to enable the buyer to independently access raw materials, manufacture, distribute, and market the Sadolin brand.
“The divestiture would take the form of a perpetual royalty-free licence to manufacture and supply Sadolin branded paint in Burundi, Kenya, Rwanda, and Uganda,” CCC said.
“However, an obligation is placed on the merging parties to ensure that the divestiture be notified to the CCC within six months from the date of merger approval, failing which this aspect of the merger will also be prohibited,” the watchdog added.
The regulator said that the buyer of the divested Sadolin brand should not have any structural relationships with the merging Kansai Plascon and AkzoNobel.
It said the divestment shall include all the required licenses to enable the buyer to independently access raw materials, manufacture, distribute, and market the Sadolin brand.
Kansai Plascon Africa acquired Kenya’s Sadolin paints for Sh10 billion in 2017.
The acquisition of Kansai Plascon’s assets in Kenya and the rest of Africa came in the wake of a buying spree by Amsterdam-based AkzoNobel, including Titan Paints in Spain and Portugal, New Nautical Coatings in the US and Grupo Orbis in Latin America.
The Comesa watchdog however said it has prohibited the Dutch firm’s acquisition of the decorative coatings business of Kansai’s in eSwatini, Zambia, and Zimbabwe on competition law grounds—making it the first merger to be prohibited by the CCC since it became operational in 2013.
“In relation to the Southern Africa region (specifically Eswatini, Zambia, and Zimbabwe), the remedies offered by the merging parties were not sufficient to address the loss in effective competition that would arise from the merger,” it said.
“There was also a serious risk that the divestiture remedy proposed in relation to the Zimbabwean market could have had unintended consequences of partitioning the Common Market, a situation that is inimical to the single market imperative of the Comesa Treaty objective. Therefore, the commission has prohibited the transaction in respect of the decorative coatings markets in Eswatini, Zambia, and Zimbabwe” it said.
