European Commission Clears DS Smith’s Acquisition of SCA Packaging

Under its EU Merger Regulation, the European Commission (EC) has cleared the proposed acquisition of SCA Packaging, a subsidiary of the Swedish group Svenska Cellulosa Aktiebolaget (SCA), by DS Smith Plc, based in the UK. SCA Packaging and DS Smith both produce corrugated packaging. The clearance is conditional upon the divestment of a number of production plants in the U.K. and France.

The EC notes that a preliminary investigation that it conducted showed that the proposed transaction would have endangered competition for some types of packaging in the two countries. The commitments offered by the parties address the concerns.

The EC found that the proposed transaction, as initially notified, would have raised competition concerns in the U.K for heavy duty and off-set litho laminated, as the merged entity would have had a strong market position without sufficient competition from other companies. The EC 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 would face higher transport costs.

To remedy the situation, DS Smith and SCA Packaging have offered to divest one of their two U.K. 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 EC's investigation showed that the divested businesses would be viable and that the commitments would resolve all identified competition concerns.

In view of the remedies proposed, the EC 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.