Archroma Operations S.a.r.l. — Combination C-2022/09/970

COMPETITION COMMISSION OF INDIA 9th February 2023 Notice under Section 6(2) of the Competition Act, 2002 jointly given by Archroma Operations S.à.r.l and Archroma Germany GmbH CORAM: Ms. Sangeeta Verma Acting Chairperson Mr. Bhagwant Singh Bishnoi Member Order under Section 31(1) of the Competition Act, 2002 1. On 19th September 2022, the Competition Commission of India (Commission) received a notice (Notice) under Section 6(2) of the Competition Act, 2002 (Act). Initially, the Notice was given only by Archroma Operations S.à.r.l (Archroma/Acquirer). Later, Archroma Germany GmbH also became a notifying party by furnishing relevant document(s). The Notice was given pursuant to the execution of Equity and Asset Purchase Agreement executed between Archroma and Huntsman International LLC (Huntsman International) on 9th August 2022.

2. The Commission, vide its communications dated 6th October 2022, 10th October 2022, and 7th November 2022, issued under Regulation 14(3) of the Competition Commission of India (Procedure in regard to transaction of business relating to combinations) Regulations, 2011, required the notifying party(ies) to remove defects in the Notice and furnish certain information relevant for the purpose of assessment of the Proposed Combination. Notifying party(ies) furnished their responses vide submissions dated 27th October, 29th November 2022, and 5th December 2022.

3. The Proposed Combination envisages the acquisition of the textile dyes and chemicals business (Textile Effects Division/Target) of Huntsman International by Archroma.

4. Archroma is said to be a global manufacturer of dyes, pigments, emulsions, and surface active chemicals used in the textile, paper, coatings, construction, and adhesive industries. It is a wholly owned indirect subsidiary of SK Capital Partners Funds III and IV, which are, in turn, managed by affiliates of SK Capital.

5. Huntsman International is a direct subsidiary of Huntsman Corporation (Huntsman). Huntsman is the ultimate parent company of Huntsman group of companies. Huntsman, including Huntsman International, is a global supplier of differentiated and specialty chemicals. It operates in four business segments, namely polyurethanes, performance products, advanced materials, and the Textile Effects Division.

6. The Target is said to be a global solutions provider in the wet processing of textiles across pre-treatment, colouration, printing and finishing, and offers a range of textile chemicals, and dyes and digital inks.

7. Both Archroma and the Target are engaged in the manufacturing and supply of chemicals and dyes for textile processing.

8. Textile chemicals are used in yarn production and preparation, fabric formation, fabric finishing, and other miscellaneous manufacturing operations. The textile chemicals play a crucial role in achieving pre-defined textile properties through the various stages of washing, scouring, mercerising, dyeing, printing, and finishing. These can be classified into the following processes:

‐ Pre-treatment: Pre-treatment processes can be carried out with fibres, yarns, or fabrics. It enables subsequent processing of the material, which needs to be prepared to accept dyes and functional chemicals;

‐ Colouration: Dyeing auxiliaries are added with dyes to enhance processing performance and efficiency; and ‐ Finishing: Once coloured, finishing chemicals are added to textiles for added value and added characteristics.

9. Dyeing is the process of application of dyes or pigments on textile materials with the goal of achieving colour with desired colour fastness. Textile dyes are water-soluble or dispersible substances for staining or colouring textiles. Textile colourants are specialty colouring chemicals that can easily fasten on various fabrics.

10. Businesses and segments where Archroma and the Target, directly or indirectly, had sales in India during 2021 are as follows:

No. Business/Segment Acquirer Target Horizontal Overlap 1. Textile chemicals ✔ ✔ ✔ Within the segment for textile chemicals a. Sizing agents ✔ ✔ ✔ b. De-sizing agents ✖ ✔ ✖ c. Bleaching auxiliaries ✔ ✔ ✔ d. Softening agents ✖ ✔ ✖ e. Dyeing and printing auxiliaries ✔ ✔ ✔ f. Optical brighteners ✔ ✔ ✔ g. Equipment and processing agents ✔ ✖ ✖ h. Coating agents ✖ ✖ ✖ i. Finishing agents ✔ ✔ ✔ j. Surfactants ✔ ✔ ✔ k. Textile lubricants ✖ ✖ ✖

2. Textile dyes ✔ ✔ ✔ Within the segment for textile dyes a. Acid dyes ✔ ✔ ✔ b. Basic dyes ✔ ✖ ✖ c. Direct dyes ✖ ✔ ✖ d. Solvent dyes ✖ ✖ ✖ e. Disperse dyes ✔ ✔ ✔ f. Mordant dyes ✖ ✖ ✖ g. Reactive dyes ✔ ✔ ✔ h. Vat dyes ✖ ✖ ✖ i. Pre-metallised acid dyes (metal- ✖ ✔ ✖ complex dyes) j. Azoic dyes (naphthol dyes) ✖ ✖ ✖ k. Sulphur dyes ✔ ✖ ✖ l. Textile pigments ✔ ✖ ✖ m. Digital inks ✔ ✔ ✔

11. It has been submitted by the notifying parties that sizing is the process of applying a protective coating on the yarn to minimise yarn breakage during weaving. Bleaching auxiliaries are used for pre-treatment of textiles and are predominantly applied to cellulosic fibres. Dyeing and printing auxiliaries are applied together with dyes to achieve water and energy savings and for improved durability of the end article. Optical brighteners are fluorescent whitening agents, used mostly to supplement bleaches. Finishing agents are used in the ‘finishing’ process, which includes wet processing of textiles to add value to it. Surfactants (surface active agents) are substances that reduce the surface tension of a solution so that it can spread and wet surfaces more effectively.

12. Acid dyes are applied under acidic conditions, are relatively easy to apply, have a wide range of colours and, depending on the dye selection, can have good colour fastness properties. Disperse dyes are non-ionic, water-insoluble dyes that do not react chemically with synthetic fibres such as nylon. Reactive dyes colour fibres by reacting to form a covalent link, which is a permanent attachment in the fibre that cannot be removed with a repeated treatment with boiling water under neutral conditions.

13. It has been submitted by the notifying parties that both Archroma and the Target supply reactive dyes that can be used either for printing dyes on cotton or on cellulosic fibres, synthetic fibres, and wool. The Target offers a reactive dye product which can achieve greater water savings compared to other reactive dyes, sold under the brand name Avitera. Archroma does not sell a comparable reactive dye product to Avitera in terms of water-saving performance.

14. The incremental market share resulting from the proposed combination for sizing agents is less than 1% both in terms of value and volume.

15. The combined market shares of the parties for bleaching auxiliaries in terms of value and volume during 2021 are in the range of [15–20]% and [25–30]%, respectively. Further, the product segment is characterised by the presence of other players such as Rossari and CHT. For the sub-segments of bleaching auxiliaries, based on the end-use of products, such as all-in-one bleaching auxiliary solution, anti-foaming agent, enzymes for pre-treatment processing, mercerising agents, neutralising agents (acids), peroxide stabilisers, scouring agents, sequestering agents, wetting/washing agents, and de-sizing agent, the combined market share of the parties is below 20%, except scouring agents, where it is below 25%. Further, neither party’s individual market share exceeds 15%, in any of the above mentioned sub-segments.

16. The combined market shares of the parties for dyeing and printing auxiliaries both in terms of value and volume during 2021 is in the range of [15–20]% with incremental market share being [5–10]%. The market is characterised by the presence of other players, such as Pidilite, Dystar, Colourtex, and CHT. For the sub-segments of dyeing and printing auxiliaries, based on the end-use of products, such as anti-migrating agents, crease inhibitors, defoaming, penetration and de-aerating agents, fixing agents, levelling and sequestering agent, pH regulators, printing auxiliaries, UV protection, washing-off agent, and wool care, the combined market share of the parties is below 25%. Further, neither party’s individual market share exceeds 15%, in any of the above mentioned sub-segments.

17. The combined market shares of the parties for optical brighteners both in terms of value and volume during 2021 are in the range of [15–20]%, with incremental market share being [5–10]%. Further, the market is characterised by the presence of other players such as Rossari and CHT. For the sub-segments of optical brighteners, based on the substrate to which it can be applied, the combined market share of parties is below 25%. Further, neither party’s individual market share exceeds the range of [10– 15]%, by value for the sub-segments.

18. The combined market shares of the parties for finishing agents both in terms of value and volume during 2021 are in the range of [5–10]%, with an incremental market share being [0–5]%. Further, the market is characterised by the presence of other players such as Britacel, Resil, and Visen. For the sub-segments of finishing agents, based on the end-use of products, such as softening agents, anti-microbial agents, anti-static, crease free/shaping, flame retardants, hydrophilic agents, hydrophobic and oil-repellent agents, and softening agents, the combined share of the parties is below 20%, except hydrophobic and oil-repellent agents, where it is below 25%. Further, individual market share of the parties do not exceed 15% in any of the above mentioned sub-segments.

19. The combined market shares of the parties for surfactants in terms of value and volume during 2021 is in the range of [5–10]% and [15–20]%, respectively, with an increment of [0–5]% by value and [5–10]% by volume. The market is characterised by the presence of other players such as Rossari and CHT. For the sub-segments of surfactants, based on the end-use of products, such as non-ionic surfactants, anionic surfactants, cationic surfactants, and amphoteric surfactants, the combined market share of the parties is below ~25%.

20. The combined market share of the parties for acid dyes in terms of value and volume during 2021 are [0–5]% and [5–10]%, respectively, with an increment in the range of [0–5]%. Further, the segment is characterised by the presence of other players such as Colourtex, Spectrum, Nova, and Colorband.

21. The combined market shares of the parties for disperse dyes in terms of value and volume during 2021 are [5–10]% and [0–5]%, respectively, with an increment in the range of [0–5]%. The segment is also characterised by the presence of other players such as Colourtex, Spectrum, Nova, and Colorband.

22. The combined market shares of the parties for reactive dyes in terms of value and volume during 2021 are in the range of [20–25]% and [10–15]%, respectively, with an increment in the range of [0–5]%. The segment is characterised by the presence of other players such as Jay, Colourtex, Dystar, and Kisco. For digital inks, the incremental market share resulting from the Proposed Combination is less than 1% both for value and volume.

23. With regard to vertical interface, it has been submitted by the notifying parties that the Target purchases certain amounts of aluminium chloride from the Acquirer to manufacture textile chemicals. The market share of Archroma for aluminium chloride is less than 5%, both in India and globally.

24. Considering the facts on record, including the details provided in the Notice and the assessment of the Proposed Combination based on factors stated in Section 20(4) of the Act, the Commission is of the opinion that the Proposed Combination is not likely to have any appreciable adverse effect on competition in India in any of the relevant market(s), and therefore, the Commission hereby approves the Proposed Combination under Section 31(1) of the Act.

25. This order may be revoked if, at any time, the information provided by the notifying parties is found to be incorrect.

26. It is made clear that nothing contained in this order shall be deemed to be confidential as the same has been used for the purposes of the Act in terms of the provisions contained in Section 57 of the Act.

27. The Secretary is directed to communicate to the notifying parties accordingly.