General Superintendence suggests blocking of acquisition in the market of metallic barriers

The General Superintendence of the Administrative Council for Economic Defense – CADE recommended, on May 16th, the blocking of a deal in which Armco Staco S.A. purchased the division of metallic barriers and galvanization previously owned by Mangels Industrial S.A.

The opinion states that the merger (file no. 08700.004054/2012-19) would cause a high concentration level in the market of metallic barriers, a type of barrier used in streets, avenues and highways to protect vehicles. The operation is the merger between the leader (Armco Staco) and the second largest company (Mangels) in the market of metallic barriers. Together, the new company would hold a market share of over 65%.

After analyzing the case, the General Superintendence concluded that the remaining competitors in the market, and also the prospects of new entrants and importers, would not be able to maintain the competition environment in the metallic barriers market. As a result, the operation could have negative effects to the commercialization of this product, impacting the costs in the construction of highways.

According to the General Superintendence, among other issues of concern, the competitors have a competitive disadvantage compared to the two companies involved in the operation. Other companies hold lower capacity of production, they face some disadvantages to access sources of steel (one of the key inputs) and they are not vertically integrated with galvanization services (a stage in the production process of the barriers, which consists of coating the metallic structure with a layer of zinc to protect the material).

The analysis conducted by the General Superintendence did not find remedies capable of eliminating the competition concerns raised from the operation. For this reason, the rejection was recommended. The case will now be reviewed by Cade’s Tribunal which is responsible for rendering the final decision.

The operation was analyzed under the former antitrust law (Law No. 8.884/94), revoked by Law 12.529/11. The opinion of the General Superintendence on the case cleans the backlog of operations notified under the Law 8.884/94 (until June 2012) that still waited for procedural input.