Mergers: Commission Approves Acquisition of SCA Packaging by DS Smith

“Corrugated packaging is used by many European businesses. The commitments offered by the merging parties ensure that it will continue to be available at cost-effective prices in the internal market" said Joaquín Almunia, Commission Vice-President in charge of competition policy.

28 May 2012 --- The European Commission has cleared under the EU Merger Regulation the proposed acquisition of SCA Packaging, a subsidiary of the Swedish group Svenska Cellulosa Aktiebolaget SCA AB, by DS Smith Plc, of the UK. SCA Packaging and DS Smith both produce corrugated packaging used to transport a wide range of industrial and consumer goods. The clearance is conditional upon the divestment of a number of production plants in the UK and France. The Commission's preliminary investigation showed that the proposed transaction would have endangered competition for some types of packaging in the UK and France. The commitments offered by the parties address these concerns.

“Corrugated packaging is used by many European businesses. The commitments offered by the merging parties ensure that it will continue to be available at cost-effective prices in the internal market" said Joaquín Almunia, Commission Vice-President in charge of competition policy.

The Commission found that the proposed transaction, as initially notified, would have raised competition concerns in the UK 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. The Commission also identified concerns in the Brittany region of France for corrugated packaging, as the merged entity would control the only three production sites in that region and competitors supplying into that region face higher transport costs.

In order to address the concerns identified in the UK, the merging parties offered to divest one of their two 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.

In view of the remedies proposed, the Commission concluded that the proposed transaction, as modified, would not significantly reduce competition in all or part of the EEA. This decision is conditional upon full compliance with the commitments.

Both DS Smith and SCA Packaging are active in the corrugated packaging industry.

DS Smith, which is listed on the London Stock Exchange, employs over 10,000 people at 94 manufacturing locations.

SCA Packaging, which is currently a wholly-owned subsidiary of SCA, employs approximately 12,600 people at 110 corrugated manufacturing locations in 21 countries.

SCA, which is one of the world's largest producers of forestry and tissue products, has recently notified the Commission of its intention to acquire the European consumer tissue business of Georgia-Pacific.