Mergers: Commission approves Glatfelter take-over of Crompton’s Lydney paper mill
European Commission - IP/06/1859 20/12/2006
Brussels, 20th December 2006
The European Commission has approved under the EU Merger Regulation the proposed takeover of Crompton’s Lydney paper mill by Glatfelter of the US. The Commission undertook an in-depth investigation to verify whether the proposed acquisition would create a dominant market player with the ability to restrict production of so called ‘wetlaid fibre materials’ (used inter alia to make tea bags) and drive up prices in the industry (see IP/06/1228) However, the market investigation has shown that several competitors are active in the relevant market for wetlaid fibre for tea and coffee filtration, which is still growing. The Commission has therefore concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or a significant part of it.
Competition Commissioner Neelie Kroes said “I wanted in particular to make sure that final consumers would not have to pay higher prices for everyday products like teabags. I am now satisfied that the prices for wetlaid fibre will not rise as a result of the merger.”
Glatfelter is a New York Stock Exchange-listed manufacturer of specialty papers with production sites in the US, Germany, France and the Philippines. The company manufactures, in particular, wetlaid fibre materials such as tea-bag paper, paper for coffee-filters and coffee-pads, as well as overlay papers for laminates which are used to produce flooring, furniture and work surfaces.
Crompton is a leading manufacturer of specialty papers for the tea-bag and coffee-filter industry with three paper mills in the UK and worldwide sales. On 7 February 2006 it was placed in court-ordered administration pursuant to UK insolvency procedures.
Glatfelter acquired a paper mill and related assets at Lydney (Gloucestershire, UK) from J.R. Crompton Ltd. The Commission investigated the case upon request by the German Bundeskartellamt pursuant to the provisions of the Merger Regulation enabling Member States to request the Commission to investigate cases that do not meet the turnover thresholds for EU jurisdiction but nevertheless affect competition throughout the EU (Article 22 (3)). The Commission opened an in-depth market investigation because it had serious concerns that the proposed transaction, as notified, would have impeded effective competition within the EEA.
The Commission’s market investigation found that although Glatfelter, together with the Lydney mill, would control a substantial share of both sales and capacity in the European Economic Area (EEA), this would not constitute a significant impediment to effective competition. The new entity would remain constrained by its competitors, such as Ahlstrom and Purico. These companies, along with other potential competitors, would be able to expand their capacity in response to an increase in the price of wetlaid fibre for tea and coffee filtration. Purico’s Chinese manufacturing facility has recently become operational and provides the market with new capacity. Purico also acquired two additional plants formerly owned by Crompton, Devon Valley and Simpson Clough, as well as the Crompton brand. These assets, together with the newly opened mill in Shanghai, establish Purico as a significant competitor in the wetlaid fibre market.