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Brussels, 24 May 2013
Mergers: Commission approves merger of Munksjö and Ahlstrom's label and processing paper business, subject to conditions
Following an in-depth investigation (see IP/12/1338), the European Commission has approved under the EU Merger Regulation the proposed merger of Munksjö AB of Sweden and the label and processing paper business of Ahlstrom Corporation of Finland in the specialty paper industry. The approval is conditional upon the divestment of Ahlstrom's abrasive paper backings and pre-impregnated paper ("PRIP") business located at Osnabrück, Germany. The Commission had concerns that the transaction, as initially notified, would have allowed the merged entity, Munksjö Oyj, to raise prices in heavy weight abrasive paper backings, which are used in abrasive products, and PRIP, a type of décor paper used by furniture manufacturers (e.g. IKEA). The commitments offered by the parties effectively address these concerns.
"The Commission's decision ensures that competition in the markets for the paper products concerned will remain strong. This means that neither the businesses that use these products nor European consumers, for example when they buy furniture, will be harmed by this merger" said Commission Vice-President in charge of competition policy Joaquín Almunia.
The proposed merger brings together the only two manufacturers of heavy weight abrasive paper backings in the European Economic Area (EEA), and the two leading players in the global market with a market share of over 80%. Heavy weight abrasive paper backings act as carriers for abrasive devices in the production of coated abrasive products. These abrasive products are used to sand or polish different substances such as wood, metals, plastics, glass, ceramics and stone. As the market for heavy weight abrasive paper backings presents high barriers to entry, the proposed transaction would have left the merged entity without a sufficient competitive constraint on this market.
The proposed merger would also bring together two of the three European manufacturers of PRIP resulting in an EEA-wide and worldwide (without China) market share of over 70%. PRIP is a type of décor paper used by furniture manufacturers such as IKEA as surface layer of furniture, for example IKEA's PAX wardrobes and BILLY bookcases. The remaining competition with German PRIP manufacturer Technocell would not be sufficient to offset a potential price increase by the merged entity.
The Commission found that the proposed transaction as initially notified would have given the merged entity excessive market power vis-à-vis its customers, ultimately leading to higher prices throughout the value chain.
To remove the Commission's concerns, Munksjö and Ahlstrom committed to divest all of Ahlstrom's heavy weight abrasive paper backings and PRIP business.
This divestment comprises the sale of Ahlstrom's Osnabrück paper plant where all of Ahlstrom's heavy weight abrasive paper backings and PRIP business is located. Ahlstrom will however retain and operate one paper machine, whose business is not related to abrasive paper backings or PRIP. Ahlstrom will enter into a number of ancillary agreements with the new owner of the Osnabrück plant to ensure the continuity of its remaining operations there. Furthermore, certain utilities and their respective facilities, namely the power plant and water facilities, will be transferred to a joint venture to be jointly controlled by the new owner of the Osnabrück plant and Ahlstrom.
The commitments offered by the parties effectively address the Commission’s concerns. The Commission concluded that competition in heavy weight abrasive paper backings and PRIP will be preserved and that the transaction, as modified by the commitments, will have no negative impact on consumers. This decision is conditional upon full compliance with the commitments.
Background and other affected markets
The proposed merger was notified to the Commission on 31 October 2012. The Commission opened an in-depth investigation in December 2012 (see IP/12/1338). The parties were advised in a statement of objections adopted on 21 February 2013 that the merger, as initially notified, raised serious competition concerns.
The Commission also examined the competitive effects of the proposed merger in the market for electrotechnical papers and concluded that the transaction would not raise competitive concerns in this market. The Commission’s investigation showed that Ahlstrom produces electrotechnical papers only in small volumes and that the merged entity would continue to face strong competition. Electrotechnical papers are used for the insulation of cables, transformers, motors, generators and bushings.
Companies and products
Munksjö is a Swedish-based manufacturer of high value-added paper products in seven product areas (decor paper, abrasive backings, electrotechnical paper, fine art paper, pulp, Spantex and thin paper). Munksjö is controlled by EQT III Limited.
Ahlstrom is a Finnish manufacturer of high performance materials, divided in four business areas: building and energy, filtration, food and medical, label and processing. The transaction only concerns Ahlstrom's label and processing business which includes decor paper, abrasive paper backings and electrotechnical paper. Ahlstrom is a publicly listed company.
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.
There are currently three other phase II investigations. The first was opened in December 2012 into the acquisition of Mach by Syniverse, two data clearing houses that settle the usage records of subscribers that roam on mobile operators' networks (see IP/12/1439). The deadline for this investigation is 20 June 2013. The second ongoing phase II investigation was opened in March into the acquisition of Shell’s Harburg refinery assets by Nynas (see IP/13/290) with a deadline set for 6 September 2013. The third ongoing phase II investigation was opened in April 2013 and relates to the acquisition of Olympic Air by Aegean Airlines (see IP/13/361) with a deadline set for 25 September 2013.