Authored by Dr. Zhan Hao (, Dr. Annie Ying Xue (

On April 22, 2013, the Ministry of Commerce (MOFCOM) announced its conditional approval of Marubeni Corporation (Marubeni)’s acquisition of Gavilon Holdings (Gavilon).

The acquiring company is a comprehensive trading company headquartered and listed in Japan. Marubeni engages in international trade spanning from food materials, food, raw materials, chemicals, energies, metals, mineral resources, to transportation machineries. Having 24 subsidiaries and branches with mature distribution channels and logistics storage facilities in China, Marubeni has been taking the lead in importing staple agricultural products into China in two consecutive years since 2011.

Headquartered in the U.S., the acquired company is a private staple commodity management firm that chiefly deals with grain, fertilizer, and energy products globally. Gavilon ranks third in North America in terms of procurement, storage and trading of grain and has one branch in China.

On May 29, 2012, the two companies entered into an equity interest purchase agreement, according to which Marubeni would acquire all equity interest of Gavilon through Gold Marble, a newly established wholly-owned U.S. subsidiary of Marubeni.

Market Definition

According to MOFCOM, the relevant commodity markets are the soybean, corn, soybean meal, and dried distillers grains import markets; and the relevant geographic market is China.

Competitive Analysis

Given the existing comprehensive advantage of Marubeni in China’s soybean import market and the influence of Gavilon in North American soybean market, MOFCOM held that the proposed deal might lead to enhanced control by Marubeni over China’s soybean import market and thereby having the effect of eliminating or restricting competition.

Accounting for 60% of global soybean trade and 80% of domestic supplies, the soybean import of China tops the list of all soybeans importers. Having almost all of its soybeans exported to China, Marubeni is the largest player in the Chinese market and has competitive edge in market distribution and client resources. Meanwhile, Gavilon has substantial influence in North America in soybean procurement, warehousing and logistics, and owns multiple purchasing platforms in main soybean producing areas and export facilities in Northwest coast of the U.S. Therefore, MOFCOM believed that following the concentration, Marubeni would be able to further expand its supplies of soybeans based on Gavilon’s capacities in North America, and strengthen Marubeni’s control of the Chinese soybean import market by virtue of the well-established distribution network and client resources.

MOFCOM also reasoned that the proposed concentration would make market entrance more difficult, given that access to sourcing channels and marketing networks, and economy of scale are necessary conditions to compete effectively in the market. In the past five years, there has been no important entrant of the global soybean trading market or Chinese soybean import market.

Additionally, MOFCOM noted that the proposed deal might further weaken the bargaining power of Chinese soybean crushers who have low concentration and small scale.

MOFCOM concluded that the proposed acquisition of Gavilon by Marubeni is likely to eliminate and restrict competition in the Chinese soybean import market. Nevertheless, MOFCOM found that it would be difficult for the concentration to eliminate or restrict competition in the Chinese corn, soybean meal, and dried distillers grain markets, considering that the parties’ combined market shares are 6%, 4.5%, and 8.4% respectively, and there are many strong competitors in the markets that can discipline any post-merger anti-competitive conducts.


After rounds of negotiations between the notifying parties and MOFCOM, the agency eventually confirmed that the remedy proposals submitted by Marubeni on April 17, 2013 could address the competitive concerns caused by the proposed concentration.

·         Structural remedies

Within 6 months of the merger clearance date, Marubeni shall set up two separate and independent legal entities and operations teams that are charged with exporting and selling soybeans to China. The “separation” and “independence” refer but are not limited to personnel decisions, procurement, marketing, sales and pricing.

·         Behavioral remedies

                 i.        Following the concentration, Marubeni’s subsidiaries shall not purchase soybeans from Gavilon’s U.S. assets unless such transaction is on fair terms;

                ii.        Marubeni’s and Gavilon’s soybean subsidiaries shall not exchange information that is competitive in nature.

               iii.        Marubeni shall appoint an independent monitoring trustee to oversee its fulfillment of the above-mentioned duties.

It is noteworthy that the parties withdrew the application near the end of Phase III and resubmitted it shortly. As indicated in Marubeni/Gavilon case, recent Glencore/Xstrata case and some others, in the face of complicated and sensitive merger deals, the strategy of withdrawal and resubmission may become a norm for notifying parties in China to avoid direct rejection by MOFCOM and maintain more leeway.