CADE clears, subject to remedies, the acquisition of the cast iron business of Teksid by Tupy

In the hearing of this Wednesday (14 April), the Administrative Council for Economic Defense (CADE) conditionally cleared the acquisition by Tupy of the cast iron business of Teksid, currently held by Fiat Chrysler. The transaction regarded five plants of Teksid located in Brazil (in the city of Betim), Portugal, Mexico, Poland and China, and was restricted to the signing of a Merger Control Agreement.

The transaction involves the production and sale of cast iron products, mainly for the automotive industry, such as engine blocks, cylinder heads, exhaust manifolds, motor rails, steering knuckles, suspension arms, amongst others.

According to the vote of the rapporteur of the case, Commissioner Luis Braido, the transaction raises competition concerns due to the increased market share the applicants would have after its completion, as entry and rivalry conditions would be insufficient to prevent the parties from exercising potential market power. Therefore, the firms signed an agreement with CADE, committing themselves to uphold the competitive conditions in this market.

Thus, the Merger Control Agreement (ACC) signed comprised, amongst other commitments, the transfer of certain supply (demand) contracts to a third party that would become a stronger competitor able to compete with Tupy and with the imports in auctions for the purchase of new volumes.

The Tribunal of CADE assessed that the remedies suggested in the agreement mitigate the identified competition concerns and decided to approve the transaction conditioned to compliance with the agreement.

Remedies

The behavioural commitments Tupy agreed to in the ACC aim at easing, for the term of five years, possible demand transfers by the current clients of Tupy and Teksid, without incurring contractual condition changes nor a requirement for minimum purchases by the committed parties.

As to the structural remedies, the applicants have committed to substantially divest signed contracts to supply iron engine blocks and iron cylinder heads to other competitors.

Access Administrative Proceedings 08700.002569/2020-86