Competition Law: Digest of PCC Decision Re

URC Proposed Merger with Central

Azucarera/RHI
FACTS:

URC is a major player in a wide range of food-related businesses, including the

production of packed foods and beverages, sugar, agro-industrial products,
and bioethanol. It mills are located in Batangas, Iloilo, Negros Oriental, Negros
Occidental, and Cagayan and produce raw sugar, refined sugar and molasses.

Meanwhile, RHI is holding company that mainly invests in agribusiness,

particularly in sugar and ethanol business. RHI operates an integrated
sugarcane milling and refining plant in Batangas and is also engaged in
trading raw and refined sugar and molasses. It has majority ownership of
NAVI, holding 67.1% of the NAVI issued shares. NAVI is primarily engaged in
the business of agricultural and industrial development, which owns farmlands
for lease in La Carlota City, Negros Occidental.

Both Company proposed transaction involves the acquisition by Universal

Robina Corporation (URC) of: (1) the sugar milling, and bio-ethanol distillery
assets of Central Azucarera de la Carlota, Inc. (CA-Carlota) and Roxol
Bioenergy Corporation (Roxol), respectively; (2) the parcels of land of CA-
Carlota and Roxol on which the assets are located; and (3) the shares held by
Roxas Holdings, Inc. (RHI) in Najalin Agri-Ventures (NAVI).

URC will acquire all buildings, improvements, machineries and equipment,

laboratory equipment, and other related assets for operating the refinery and
milling plant of CA-Carlota and the bioethanol plant of Roxol, as well as
approximately 1,069,037 square meters and 391,826 square meters of land
where the sellers’ assets in La Carlota City, Negros Occidental, respectively.
URC is also set to acquire 520,115 NAVI common shares held by RHI and its
nominee shareholders.

The Philippine Competition Commission earlier raised competition concerns on

URC’s proposed acquisition of CADPI and RHI assets before the entities
voluntarily submitted commitments that failed to sufficiently address the
competition concerns.

ISSUES:
Whether or not the merger between Universal Robina Corp. and the group of
Central Azucarera Don Pedro Inc. and Roxas Holdings Inc. is a violation of
Philippine Competition Law.

HELD :
Yes, the Philippine Competition Commission (PCC) held that URC's buyout of
its lone competitor in sugarcane milling services would monopolize the
business in southern Luzon. URC's sugar mill is located in Balayan, Batangas
while CADPI-RHI's milling facilities are in Nasugbu town in the same province.
The monopoly of the merger would "substantially lessen competition" not only
in Batangas but also in neighboring provinces Cavite, Laguna, and Quezon.
The farmers might lose the benefits of competition due to the merger, especially
in terms of sharing agreements, sugar recovery rates and incentives. The
prohibition prevents this deal from creating a monopoly in the relevant market
that could harm the welfare of the sugarcane planters. A merger-to-monopoly
deal is among the most detrimental types of business transactions. The URC
takeover removes its only competitor, erodes the benefits of competition for the
sugarcane planters, and leaves market power at the hands of a single provider
in an area.