Supervision of the Cade recommends disapproval of Liquigas-Doimo Ultragaz purchase

The general oversight of the Administrative Council for economic Defense (Cade) has recommended to the Court of the disapproval of the purchase of the Liquigas-Doimo, controlled by Petrobras, Ultragaz, Ultra group. The operation was announced in June by $2.8 billion. Last Friday, 25, the associated press/Broadcast reported that the opinion should leave in the next few days.
The final word will be given by the Court of Cade. The Superintendency advise on mergers and acquisitions, which the Court is not obliged to follow, although do it most of the time. If the operation is rejected by the Council, will be the third deal barred this year – Cade has already denied the purchases of Statius by Kroton and Alesat by the Ipiranga.
The opinion of superintendência highlights the operation merges the two major distributors of liquefied petroleum gas (LPG), the cooking gas. "The operation would mean the Elimination of a competitor relevant in a market where the four largest firms account for over 85% of the offer," he says.
According to the opinion, the operation would generate high overlaps in most States, both in the market of bottled LPG when in bulk. The operation would generate even a monopoly in the market for distribution of LPG fuel, used in aerosols.
In addition, the identified high barriers to entry in all markets analysed, due to regulatory constraints, difficulty of access to the input by the Petrobras, as well as exclusive advantages held by companies already consolidated.
"Although there are other large distributors, also don't believe that they have incentives to compete effectively with the new company, since the shares held by agents are very stable in the past ten years. This demonstrates a low aggression and rivalry between competitors in the industry. ", he adds.