The Competition Commission of Pakistan (CCP) held a hearing today in the matter of the proposed acquisition of 79% of M/s Agritech (Pvt) Ltd. shares, (Agritech) by M/s Fauji Fertilizer Company, Ltd. (FFC). Both parties operate in the fertilizer market, where FFC’s current market share is at 48% and Agritech’s is at 6%. The hearing was chaired by CCP Chairperson, Rahat Kaunain Hassan, and CCP Members Dr. Joseph Wilson and Vadiyya S. Khalil. The two parties were represented by Orr Dignam in the case of FFC and Raja Mohammad Akram & Co., who spoke on behalf Agritech. The legal teams were accompanied by bankers from National Bank of Pakistan and Faysal Bank. As part of the second phase review, CCP provided an opportunity of hearing to the parties to respond to the submitted concerns of CCP in a proposed merger that involves potentially significant market concentration in the fertilizer market. The proposed acquisition involves the desired acquisition by FFC of 79% of Agritech shares. Agritech’s parent company is Azgard Ltd., and Agritech also owns Hazara Phosphates Ltd., another fertilizer producer as a wholly-owned subsidiary. In the course of the hearing, the CCP bench asked Agritech to demonstrate that it had attempted to attract competitive acquisition bids from companies both in the domestic and international market, as it claimed. Furthermore, the CCP bench asked Agritech to demonstrate on what basis it was adopting a failing firm defense, which has been invoked pursuant to Section 11(10) of the Competition Act 2010. Responding to the written questions, FFC’s counsel stated that they are interested in a consolidated acquisition of Agritech, which would include Hazara Phosphates, Ltd. They stated further that the merger would result in significant synergies and efficiencies for FFC as the acquiring company. The CCP bench asked whether such efficiencies would result in a cheaper product for the consumer, but FFC did not make any such commitment. The CCP bench pointed out that the Agritech product was already cheaper than the FFC product, so how would their argument on greater economies of scale be justified. In this regard, FFC stated that the quality of product would improve. Agritech maintained that because its parent company was a failing firm, any restriction on such merger would result in the loss of 12,000 direct jobs and place an significant burden on the banking sector because of its immense liabilities. CCP has given the parties seven (7) days to respond with the requested information and documentation, in order to proceed further.
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