Both Rexam and Ball supply beverage cans and, to a lesser extent, aluminium bottles, to soft drinks, beer and energy drinks manufacturers. Beverage cans are manufactured out of two separate metal parts, a can body and a lid (the can end), and are used to hold liquids such as carbonated soft drinks, alcoholic beverages, fruit juice and energy drinks.
The Commission's investigation showed that the transaction, as notified, would have reduced competition in the already concentrated markets for beverage cans and risked increasing prices for customers. The Commission's approval is therefore conditional upon Ball divesting ten plants making can bodies and two plants making can ends to a suitable purchaser, so as to address the Commission's concerns.
Commissioner Margrethe Vestager, in charge of competition policy, commented: "Soft drinks or beer in cans are widely consumed by European citizens. The substantial remedies offered will ensure that effective competition is maintained in the already concentrated drink can industry so consumers do not end up paying higher prices for their favourite refreshments".
The Commission’s investigation
The transaction was notified to the Commission on 15 June 2015. The Commission opened an in-depth investigation on 20 July 2015.
Rexam and Ball are, respectively, the first and second largest beverage can manufacturers in the European Economic Area (EEA) and also the two market leaders worldwide. The Commission therefore focussed its investigation on competition in the beverage can markets.
The investigation revealed that the transaction, as initially notified, would have significantly reduced competition for customers with filling locations in each of the following areas: Benelux, Central Europe, France, the Iberian Peninsula, Italy, North-East Europe, Nordic countries, South-East Europe, and UK and Ireland. The proposed takeover, in the absence of remedies, would have eliminated an important competitor and reduced the choice of suitable suppliers in already concentrated markets, which could have led to price increases.
Can-Pack and Crown, the only remaining main players in Europe, would not have posed a sufficient competitive constraint on the merged entity after the transaction. Moreover, the industry is characterised by high barriers to entry. Manufacturers need to have a certain scale and geographic spread to compete effectively for the largest volumes and provide the wide variety of can sizes and shapes required by customers in the EEA.
The Commission maintained close cooperation with the Federal Trade Commission in the US and CADE in Brazil, which were also examining the proposed transaction.
To address the Commission's concerns, Ball submitted commitments to divest ten can body plants and two can end plants located within the EEA. The divestiture consists of most of Ball’s Metal Beverage Packaging activities in Europe, and two of Rexam's can-body plants.
The can body plants to be divested are: Ball’s plants in the UK (Rugby and Wrexham), Germany (Weissenthurm, Hassloch and Hermsdorf), the Netherlands (Oss) and Poland (Radomsko), one of Ball’s two plants in France (La Ciotat), Rexam’s plant in Austria (Enzesfeld) and one of Rexam’s two plants in Spain (Valdemarillo). Ball is also divesting two can end plants, one in Deeside (the UK) and another in Braunschweig (Germany).
The divestiture also includes Ball’s Business and Technical Centre in Bonn which provides support functions. Ball will keep its plants in Bierne, France and Belgrade, Serbia, which both serve customers in the EEA.
The business to be divested will have a total manufacturing capacity in the EEA of over 18 billion cans.
The Commission concluded that the commitments ensure that an important alternative supplier will remain available. They address in full the competition concerns raised on the markets for beverage cans. The Commission also reached the conclusion that the business to be divested would be able to compete effectively and immediately following its acquisition by a suitable purchaser so as to replicate the competitive pressure exercised by Ball and Rexam on each other before the transaction. The decision is conditional upon full implementation of the commitments.
Companies and products
Ball is a US-based company active worldwide in the production and supply of metal packaging for beverage, food and household products. It has production facilities in North America, Brazil, Europe and the Asia Pacific region. Ball is also active in the design, development and manufacture of aerospace systems. Ball is the largest supplier of beverage cans worldwide and the second largest supplier in the EEA.
Rexam PLC is a UK-based company active worldwide in beverage can manufacturing, with production facilities in North America, South America, Europe, Africa, the Middle East and Asia. It is the second largest beverage can manufacturer worldwide and the largest supplier in the EEA.
Merger 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 a substantial part of it.
In addition to this investigation, there are currently five other in-depth merger investigations:
- the proposed acquisition of office supplies distributor Office Depot by its competitor Staples, with a decision deadline of 9 March 2016
- the proposed acquisition of BASE Belgium by Liberty Global, with a decision deadline on 17 March 2016
- The proposed acquisition of Telefónica UK by Hutchinson 3G UK, with a decision deadline on 22 April 2016
- The proposed acquisition of oilfield service provider Baker Hughes by rival Halliburton, with a decision deadline on 26 May 2016
- the proposed acquisition of the Greek gas transmission system operator DESFA by the Azeri state oil company SOCAR