Brussels, 27 November 2012
Mergers: Commission clears acquisition of Swedish paper producer Billerud by Swedish investment company Kinnevik, subject to conditions
The European Commission has cleared under the EU Merger Regulation the proposed acquisition of Swedish pulp- and paper-based packaging products manufacturer Billerud by the Swedish investment company Kinnevik, owner of the rival paper company Korsnäs, also of Sweden. The clearance is conditional upon the divestment of Korsnäs' white sack kraft paper and white machine finished/unglazed ("MF/UG") kraft paper business. The Commission had concerns that the transaction would have reduced effective competition in these markets. The commitments offered by the parties address these concerns.
The Commission's investigation showed that the proposed transaction, as initially notified, would have combined the two leading suppliers of white sack kraft paper and the first and third suppliers of white MF/UG kraft paper in the European Economic Area (EEA), resulting in very high market shares. The Commission's investigation also showed that post-transaction competition from current and potential competitors would have been limited and customers would therefore have had few alternative suppliers to turn to.
In order to address these concerns, Kinnevik offered to divest Korsnäs' PM2 paper machine located in Korsnäs' Gävle production mill in Sweden, including all related assets and personnel. This is the only Korsnäs machine producing white sack kraft paper and white MF/UG kraft paper and, as such, the divestment covers the whole of Korsnäs' business in white sack kraft and white MF/UG paper. The commitments also foresee a number of input supply agreements between Kinnevik and the purchaser at the option of the purchaser.
In view of the remedies proposed, the Commission concluded that the proposed transaction, as modified, would not significantly impede effective competition in the EEA. This decision is conditional upon full compliance with the commitments.
The transaction was notified to the Commission on 5 October 2012.
The Commission assessed the impact of the proposed transaction on a number of markets where the merging parties' activities overlap, notably in kraft paper, corrugated case materials, liquid packaging board and in the procurement and supply of wood.
The Commission also examined two vertical relationships arising from the merging parties' activities, since Billerud supplies wood pulp to paper manufacturers on the open market and both Billerud and Korsnäs are active in the procurement and supply of wood.
With the exception of white sack kraft paper and white MF/UG kraft paper, the Commission's investigation confirmed that the proposed transaction would not raise competition concerns on any of the markets examined as the increment in market share in most instances was limited or the merged entity would continue to face competition from a number of competitors.
Companies and products
Kinnevik is a Swedish company which has equity interests in various companies active in telecommunications & services, online, media, microfinancing, paper industry, agriculture and renewable energy.
Korsnäs, a wholly-owned subsidiary of Kinnevik, is a Swedish manufacturer of paper-based packaging materials, covering cartonboard, kraftliner, kraft paper and liquid packaging board.
Billerud is a Swedish company which manufactures pulp- and paper-based packaging products and is active in the areas of packaging and specialty paper, kraft paper, packaging boards and market wood pulp.
White sack kraft paper is used in sacks for cement, pet food, flour or agricultural products. End-use applications for white MF/UG kraft paper include carrier bags, pulp bale wrapping and consumer packaging of sugar and flour. In particular, both products are used for consumer goods where customers require a white finish with good printability.
Merger control rules and procedures
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).
More information on the case is available at: