The United States Federal Trade Commission announced Tuesday that it will require Quaker Chemical and Houghton International to divest operations related to aluminum and steel rolling oils as a condition of their delayed merger.
Details of the divestment have already been worked out, as the commission stated that the companies have agreed to sell assets to a subsidiary of French energy giant Total S.A. The assets to be divested include Houghton’s product lines in North America for aluminum hot rolling oils and steel cold rolling oils and Quaker Chemical product lines associated with such materials, including steel cleaners and hydraulic fluids compatible with aluminum hot rolling oils.
The commission’s statement did not disclose the price for Total’s acquisition of those assets. A Quaker Chemical spokesperson said the company would issue a statement today. Total and FTC representatives could not be reached for comment.
Quaker Chemical officials said as early as mid-2018 that they always expected antitrust regulators in the U.S. and the European Union to require some divestments. They predicted that the operations they would be required to sell would constitute no more than 3 percent of the companies combined revenues.
Quaker Chemical and Houghton are two of the world’s largest suppliers of metalworking fluids, and North America is the largest market for both. The companies first announced their agreement for Quaker Chemical to acquire Houghton in April of 2017, advising then that they expected the deal to close in late 2017 or early 2018. By July of the following year they had announced that the deal was delayed by discussions with antitrust regulators.
As part of the settlement, the commission filed a complaint Tuesday saying that the companies are North America’s only commercial suppliers of aluminum hot rolling oils and that their combination would form a monopoly in that market absent divestment. Other suppliers exist in the regions market for steel cold rolling oils, but the commission said Quaker Chemical and Houghton are by far the largest and that other companies lack the staffing or technical expertise to compete with the merged company.
Rolling oils are applied as aluminum and steel pass between rollers in the production of sheet metal in order to lubricate the process and protect the metal being formed. Steel cold rolling oils include sheet cold rolling oil, tin plate rolling oil and pickle oil. Tin plate rolling oil is used when steel is rolled to a thinner gauge, while pickle oil is used to prevent corrosion after the steel passes through an acid bath.
Manufacturers use such large volumes of rolling oils that it is neither economical nor logistically practical to supply them from foreign locations, the commission said. It added that it would not be practical for new suppliers to enter the market soon enough to prevent damage to competition.
In the absence of divestment, the commission concluded, Quaker Chemical would end up with a regional monopoly in aluminum hot rolling oils and would wield unilateral power that would substantially lessen competition in steel cold rolling oils and related services.
The five-member commission voted unanimously to issue the complaint and accept the settlement. Public comments will be accepted for 30 days after the settlement is published in the Federal Register.