The European Commission has approved the merger of two of Brazil’s major juice processing firms. The EU commission approved the merger of Citrovita and Citrosuco, who together process a combined 40 per cent of the orange juice from Brazil. The merger creates one of the world’s biggest wholesale suppliers of orange juice, with US$1.2 billion in per annum revenues.

The European Commission in its ruling decided that competition would not be hampered, despite the size of the deal. The proposed joint venture combines two of the four main suppliers of orange juice to Europe. However, the EU Commission concluded that there are enough rivals in Europe and elsewhere to preserve competition.

The competitors have sufficient market power to ensure that competition would not be undermined, said the Commission. In its ruling, the Commission said competitors are not restricted in their access to fresh oranges so the Brazilian joint venture would be unable to increase market prices by reducing output. If the joint venture ups its prices, customers could easily switch to another supplier at a low cost, noted the Commission.

The merger between Citrovita and Citrosuco is part of a movement towards greater consolidation in the juice market. This concentration at the top of the market is fueling consolidation down the supply chain.

Citrovita, controlled by Sao Paulo-based Votorantim Participacoes SA, and Citrosuco, controlled by Matao, Brazil- based Grupo Fischer, said last May they would merge.

European regulators opened an in-depth probe in January when they said the deal may raise competition problems because the merged company would have a “strong” market position for by-products such as orange oils and essences.

However, the completion of the merger process still requires the approval of the Brazilian antitrust agency. The antitrust arm of Brazil’s finance ministry, known as SEAE, has already recommended that regulator Cade approve the deal without conditions. Citrosuco and Citrovita own six processing plants in Brazil, one in Florida and eight port terminals in Brazil, Europe and Asia.

A wholly owned Brazilian company with operations in 24 countries worldwide, Votorantim Group’s activities are focused on key sectors of the economy that demand capital intensive and high scale production processes such as cement, mining and metallurgy (aluminum, nickel and zinc), steel mill, pulp and paper, concentrated orange juice, and energy self-generation.

In the financial market, the Group trades through Votorantim Finance and, through its New Business segment, Votorantim sponsors companies and projects related to biotechnology, mineral research and chemical specialties.

6th May 2011