U.S. trade body seeks to prevent merger of two Canadian chemical firms

CALGARY – The U.S. Federal Trade Commission has filed a complaint aimed at blocking the planned merger of two Canadian companies that are major suppliers of a chemical used to whiten several types of paper-based consumer products.

The FTC says the proposed merger between Canexus Corp. (TSX:CUS) and Superior Plus Corp. (TSX:SPB) would violate antitrust laws as it would significantly reduce competition in the North American market for sodium chlorate, a chemical used to bleach wood pulp that is processed into paper, tissue, diaper liners and other products.

If their merger proceeds, Canexus and Superior Plus, based in Calgary and Toronto, respectively, along with rival AkzoNobel would control about 80 per cent of the sodium chlorate capacity in North America, the FTC says.

The FTC’s Canadian counterpart said Tuesday that while it concluded that the merger would likely lead to a substantial reduction in competition for various industrial chemicals in Canada, it won’t oppose the merger.

The Competition Bureau cited an exception under the Competition Act that allows for a trade-off between efficiency and anti-competition effects.

“In this case, the bureau considered factors such as the elimination of overhead costs, freight optimization and the elimination of duplicate corporate services,” the bureau said in a statement.

The FTC’s complaint says there are no viable substitutes for sodium chlorate in the pulp bleaching process and no meaningful imports to compete against the North American producers.

The FTC complaint posted online Monday also alleges that the merger would likely to lead to anti-competitive reductions in output and higher prices.

Canexus says it and Superior Plus are holding discussions to possibly extend the deadline to finalize the merger agreement to allow time for Superior to litigate the FTC action. The deadline is Wednesday.