Cofece stops consolidation of Rea Magnet Wire Company and Xignux

Mexico City (apro) – The Federal Economic Competition Commission (Cofece) has refused to authorize the joining of Rea Magnet Wire Company and Xignux, warning of market risks. The agency responsible for combating monopolistic practices explained in a statement that the concentration of the two companies in the business of enameled wire production and distribution would lead to a position of power that would “have a negative impact on the process of competition and free competition”. The requested concentration includes joint investments in their operations in Mexico and the United States. According to Cofece, it found that the transaction would include the union of the first (Rea) and third (Xignux) competitors in North America, “through which they would accumulate significant market shares in terms of sales, against a background of high barriers to entry and stable shares of current competitors in recent years.” In its analysis, the commission warned that if the concentration is approved, the resulting company could raise prices, “there would not be sufficient competitive pressure from other players in North America to prevent or offset price increases, and magnet wire customers could not substitute sourcing with imports from other regions such as Asia, as this would mean increased shipping costs, longer delivery times and increased logistical risks.” Cofece added that the decision could be reviewed if the two companies filed a request with the federal judiciary. Magnet wire is used as an input for products such as electric motors in heating and air conditioning units, household appliances and cars.