China conditionally approves Marubeni-Gavilon deal

BEIJING, April 24 (Xinhua) -- China's anti-trust authorities have approved Marubeni Corp's acquisition of Gavilon Holdings with conditions clearing the regulatory hurdles for the Japanese grain dealer's 5.6 billion-U.S dollar purchase.

The Ministry of Commerce (MOC) said in a statement on Wednesday that to win approval, the Tokyo-based merchant shall fulfil its obligation to keep independent businesses between Marubeni's and Gavilon's Chinese units.

The MOC ruled that the acquisition may exclude or limit relevant competition in China, the world's largest soybean importer, as Marubeni exported 10.5 million tonnes, or about 18 percent of the country's total soybean imports last year.

China relies on soybean imports to meet about 80 percent of domestic consumption, with imports totaling 58.38 million tonnes last year, or 60 percent of the world's total trade, MOC data showed.

According to the MOC, 99 percent of Marubeni's soybean trade was exported to China, while exports of agricultural products by Gavilon totaled 400,000 tonnes last year.

The ministry said China's soybean crushers are mainly small enterprises that have weak bargaining capability, thus Marubeni's acquisition of U.S.-based Gavilon may further undermine the downstream enterprise's ability to bargain.

To win the approval, Marubeni should establish two independent legal entities and install two independent operating teams to export and sell soybeans to China.

Marubeni must maintain the separation and independence between the soybean units of itself and Gavilon in terms of personnel appointments, purchasing, marketing, sales and pricing.

A firewall should also be set up between the two companies' soybean units to prevent them from exchanging competitive information on sales prices, costs, sales and purchasing, clients and plans about marketing and strategy.

Marubeni should submit a report to the MOC and trusted independent supervisors within the two-year term on the implementation of the obligations set by the ministry.

China's ruling comes almost 11 months after Marubeni submitted an application of an anti-monopoly review of the transaction, which has received clearance from U.S. anti-competition authorities.

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