DS Smith's SCA Packaging acquisition clears competition hurdle
By Melanie Defries Monday, 28 May 2012
DS Smith's proposed acquisition of Europe's second largest packaging business, SCA Packaging, has been approved by regulators after it agreed to sell three production plants in the UK and France.
The packaging group, which launched its £1.4bn reverse takeover bid in January, is to sell the plants to address concerns by the European Commission that the acquisition would threaten competition in the market.
It is to sell its Caradec site in north-west France and an SCA site in Darlington but is yet to confirm whether it will divest an SCA plant in Hinckley, Leicestershire, without the Delta part of the business, or a DS Smith facility in Monmouth, which would exclude its PSM operation.
DS Smith said the sale of three of its sites would represent around 1% of the enlarged group’s profits.
The group declined to comment on whether any sales were underway or whether there were many potential buyers.
The EC said that DS Smith’s original takeover proposal could have caused competition concerns in the UK for heavy duty and offset litho laminated packaging "as the merged entity would have had a strong market position without sufficient constraint from competitors".
It also identified problems in the Brittany region of France for corrugated packaging, as DS Smith would have controlled the only three production sites in the region. Other suppliers would have faced higher transport costs, it said.
EC vice-president for competition policy Joaquin Almunia said the agreement would ensure that corrugated packaging "will continue to be available at cost-effective prices in the internal market."
DS Smith has more than 10,000 staff at 94 different manufacturing sites while SCA Packaging employs around 12,600 people at 110 different sites in 21 countries.
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