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The Competition Commission of India approves the acquisition of a 25 percent equity share capital in MTC Business Private Limited by Mitsui and Co. Asia Pacific Pte. Ltd. The transaction includes a primary subscription and a secondary purchase of shares. The Commission concludes that the proposed combination does not cause an appreciable adverse effect on competition in India because the combined market shares and vertical linkages are insignificant.
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COMPETITION COMMISSION OF INDIA
Combination Registration No. C-2024/06/1161
14th August 2024
Notice under Section 6(2) of the Competition Act, 2002 given by Mitsui & Co. (Asia Pacific) Pte. Ltd.
CORAM:
Ms. Ravneet Kaur Chairperson
Mr. Anil Agrawal Member
Ms. Sweta Kakkad Member
Mr. Deepak Anurag Member
Order under Section 31(1) of the Competition Act, 2002
On 21st June 2024, the Competition Commission of India (Commission) received a Notice under Section 6(2) of the Competition Act, 2002 (Act) given by Mitsui & Co. (Asia Pacific) Pte. Ltd. (Acquirer). The Notice was filed pursuant to the execution of (i) Share subscription and purchase agreement dated 8th June 2024 (SSPA), executed between Mitsui, the Mehta Trust, Mr. Narendra Maganlal Mehta, Mr. Sanjay Maganlal Mehta, and Mr. Manoj Maganlal Mehta (collectively referred to as the Trustees), Mr. Yash Mehta and MTC Business Private Limited (MTC/Target); and (ii) Shareholders' Agreement dated 8th June 2024 (SHA), executed between Mitsui, the Mehta Trust (acting through its Trustees), and MTC.
The MTC Group is undertaking an internal restructuring prior to the Proposed Combination to consolidate the trading business of MTC Group in MTC. The Proposed Combination envisages the acquisition of 25% of the total equity share capital of MTC by the Acquirer (on a fully diluted basis), in the manner detailed below –
In terms of Regulation 14 of the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (Combination Regulations), vide letter dated 9th July 2024, certain information and clarifications were sought from the Acquirer. The response to this letter was submitted by the Acquirer on 22nd July 2024.
The Acquirer, a general trading company, with a highly diversified business and investment portfolio in the Asia-Pacific region, operates in various business areas including iron & steel products, mineral & metal resources, etc. The Acquirer is a wholly-owned subsidiary of Mitsui & Co. Ltd. which was established in 1947 and has offices and overseas trading affiliates in 61 countries and regions. Mitsui & Co. Ltd. and its affiliates are collectively referred to as 'the Mitsui Group'. Mitsui & Co. Ltd. is listed with the Tokyo Stock Exchange and is engaged in various business areas including, mineral and metal resources, energy, infrastructure projects, mobility, chemicals, iron & steel products, food, food & retail management, wellness, IT & communication business, corporate development business.
The Target1 is an Indian company primarily engaged in the trading of ferrous and non-ferrous metal scrap, ferroalloys and base, and minor metals in India and worldwide and demolition business in India. The Target belongs to the MTC Group, which is broadly engaged in the business of trading, manufacturing, demolition, and automobile retail.
For the purpose of overlap assessment, the activities of the Acquirer Group and the Target (including their affiliates) have been considered. Considering their presence, it was observed that the Acquirer Group and Target exhibit horizontal overlaps in the market segments for (i) Collection, Processing and Sale of Scrap Metals2, (ii) Sale of Ferroalloys3, (iii) Sale of Base and Minor Metals4, (iv) Sale of Chemicals5, and (v) Sale of Coal/Coke6. With respect to ferroalloys, base and minor metals, chemicals and non–coking coal, it has been submitted that each of products belonging to the aforementioned broad categories shall be considered as separate markets, due to (i) each product being specialized and having distinct physical and chemical characteristics, (ii) each products having distinct end – use and application and not being substitutable with each other.
The Commission observed that, considering the nature and extent of aforesaid overlaps and the competition assessment given in the subsequent paragraph, the Proposed Combination is not likely to cause a significant change in market dynamics in any of the plausible markets that could be delineated and accordingly, decided to keep the definition of relevant market open.
The combined market share of the Acquirer Group and Target in the overlapping market segments, on the basis of total volume, is insignificant so as to cause any competition concern. The combined market share of the of the Acquirer Group and Target for most market segments is less than 10%, with an exception to two market segments where their combined market shares are in the range of [10-15]%, namely the market segments of lead scraps and nickel cathodes/briquettes. Further, the incremental market share is less than 5% in all the market segments that have been analysed. Further, the market segments are fragmented with the presence of other competitors in each of the market segment that has been analysed.
The Acquirer has also submitted that it, along with the affiliates of the Acquirer Group, have made supplies of certain overlapping products with the Target as part of their ordinary business transactions. Though the Acquirer has claimed that these trading/ supply arrangements ought to be considered as existing supply arrangements, the Commission is of the view that such sales by the Acquirer to Target and then resale by the Target to end customer places the Target and the Acquirer Group at different stages/levels of the production chain for the overlapping products, resulting in vertical linkages between the Acquirer Group and the Target. However, based on the miniscule presence of the Acquirer Group and the Target in the overlapping segments, such vertical linkages are unlikely to have any material impact on the overlapping markets.
Considering the material on record, including the details provided in the Notice and the assessment of the Proposed Combination based on the factors stated in Section 20(4) of the Act, the Commission is of the opinion that the Proposed Combination is not likely to have appreciable adverse effect on competition in India. Therefore, the Commission approves the Proposed Combination under Section 31(1) of the Act.
The order may be revoked if, at any time, the information provided by the Acquirer is found to be incorrect.
The information provided by the Acquirer shall be treated as confidential in terms of and subject to provisions of Section 57 of the Act.
The Secretary is directed to communicate to the Acquirer accordingly.
1 The proposed acquisition of the Target refers to the MTC as it stands after internal restructuring, i.e. including all trading business of the MTC Group. 2 Includes the segments of Ferrous Scrap and Non – Ferrous Scrap, which can be further sub – segmented into (i) carbon steel scrap and stainless (alloyed) steel scrap; and (ii) copper scrap, aluminium scrap, zinc scrap, lead scrap and brass scrap, respectively. 3 Includes the segments of Ferro Nickel and Ferro Silicon. 4 Includes the segments of Nickel Cathodes/Briquettes, Copper Cathodes and Cobalt Metal. 5 Includes the segments of Nickel Sulphates and Nickel Chloride. 6 Includes the segment of Thermal/Non – Coking/Steam Coal.
