Under this transaction, originally announced in 2008, Mexichem acquired two subsidiaries wholly owned by its competitor Cydsa: Policyd and the pipe maker Plasticos Rex.
Sources estimate that the purchase of Cydsa's subsidiaries would cost Mexichem nearly $160 million and would represent additional yearly sales of $300 million.
Mexichem had until November 21 to complete the integration process or it would have faced fines or suspension from trading at the Mexican Stock Exchange.
In a letter sent to its investors Thursday, Mexichem said the agreement comprises the sale of its Santa Clara chlorine-caustic soda plant to Cydsa, but did not disclose the amount of this transaction.
Last August, the CFC approved the concentration between Mexichem and Cydsa under certain conditions oriented to protect the Mexican resin and pipe PVC markets, and avoid excessive production of those products. On May 7, 2009, the regulator rejected Mexichem's request to buy Cydsa's assets due to a compensatory fee that banned US imports.
Authorities based their decision on the fact that the Mexichem acquisition would imply an excessive concentration in the domestic market. However after the compensatory fee was lifted recently by the Mexican Economy Ministry, Mexichem's proposal was reviewed by the CFC. The transaction was
authorized under the following terms:
-During the next 10 years, Mexichem, or any other related company, should not pursue to investigate, impose or review compensatory fees to PVC resin imports from the United States.
-In case Mexichem sells the company or assets gained in this transaction, it will transfer the commitment mentioned above to the buyer and make sure that it is carried through.
-Mexichem will not condition the sale of PVC resin, or deny the supply, or exclude of possible discounts to those clients that decide to import.
-Mexichem will abstain from acquiring a PVC pipe production plant, originally included in this transaction, to avoid excessive concentration, or it will sell to a third party the production capacity equivalent to that plant.
Mexichem is a public company that leads the Mexican chloro-vinyl chain with a total annual production capacity of 380,000/mt.
Since 2003, the company's expansion plan has included the purchase of 12 companies in the US and Latin American countries with an investment close to $1.9 billion, according to its 2009 annual report.
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