DS Smith buy of SCA Packaging cleared subject to conditions
By Sophie Mosca | Friday 25 May 2012
DS Smith Plc of the UK has received the green light to purchase its competitor in corrugated packaging, SCA Packaging, a subsidiary of the Swedish group Svenska Cellulosa Aktiebolaget SCA AB. The deal is worth an estimated €1.7 billion and was authorised by the European Commission, on 25 May. However, the clearance is conditional upon the divestment of a number of production plants in the UK and France. Iin order to guarantee competition in France on the market of corrugated packaging in Brittany where the merged entity would control the only three production sites, the Commission has requested that the divestiture of one of these plants. In the UK, the proposed transaction would have raised competition concerns for two types of packaging known as heavy duty and off-set litho laminated, as the merged entity would have had a strong market position without sufficient constraint from competitors.
Therefore the EU executive has imposed the divestment of two of the UK plants producing heavy duty corrugated packaging, and one plant producing litho-laminated corrugated packaging. The divestments entirely remove the increment resulting from the merger in these product areas. In addition, the merging parties committed to divest one of their three plants in Brittany, which would eliminate any overlap resulting from the proposed transaction. The Commission’s investigation showed that the divested businesses would be viable and that the commitments would resolve all identified competition concerns. In the other markets, where the parties’ activities overlap, the merged entity’s market share would remain relatively limited and it would continue to face a number of credible competitors.