DS Smith gets EC approval for SCA Packaging takeover but must sell 3 plants

By Rory Harrington

- Last updated on GMT

Related tags Ds smith European union

DS Smith chief Miles Roberts
DS Smith chief Miles Roberts
DS Smith has today received approval from the European Commission for its €1.6bn takeover of SCA Packaging.

But Brussels granted clearance on the condition that the corrugated packaging producers divest three plants – two in the UK and one in France.

A DS Smith spokeswoman confirmed the facilities affected by the conditions were SCA’s French plant in Caradec, Brittany and its site in Darlington, England.

The other factory would either be SCA’s Hinckley plant, excluding the Delta business, or DS Smith’s Monmouth facility, excluding the Specialty and PSM operations.

“A decision on which plant is divested will be made as the acquisition is finalised,”​ she added.

Competition concerns

The EC said an initial investigation of the takeover, which was unveiled in January 2012, had raised fears it would harm competition for a number of packaging segments in the two countries.

It added that the agreement by DS Smith and SCA Packaging to sell the plants had resolved the 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, EC vice-president in charge of competition policy.

EC competition chiefs said the original takeover proposal raised competition concerns in the UK for heavy duty and off-set litho laminated packaging as DS Smith would have had a strong market position without sufficient constraint from competitors.

Similar concerns were also identified in the Brittany region of France for corrugated packaging, as the firm would control the only three production sites in that region and competitors supplying into that region face higher transport costs.

The EC said all the divested businesses would be viable.

Conditions set for takeover completion

A DS Smith statement said: “The clearance requires DS Smith to divest three sites after the acquisition, currently representing approximately 1% of the enlarged Group profit. Today’s decision allows DS Smith to proceed towards completion of the acquisition, as planned.”

Jan Johansson, president and CEO of SCA, said: "The most important condition for finalizing the deal has now been fulfilled. Today's decision by the EU will enable SCA to continue to strengthen and consolidate its positions in the hygiene and forest products areas."

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