Commission approves acquisition of Europac by DS Smith, subject to conditions

The European Commission has approved under the EU Merger Regulation the acquisition of Europac by DS Smith, both manufacturers of paper and packaging products. The decision is conditional on the divestment of a number of production plants in Portugal and France.

DS Smith and Europac are both manufacturers of a wide range of paper and packaging products, in particular corrugated packaging such as corrugate cases used to transport industrial and consumer goods. DS Smith is active across the European Economic Area (EEA) and Europac has activities in France, Spain and Portugal.

The Commission’s investigation

The Commission’s investigation focused on the markets for corrugated case materials, sheets and cases. Corrugated case material is used to manufacture corrugated sheets, which in turn are converted into corrugated cases for sale to end-customers.

The Commission was concerned that the proposed acquisition would significantly reduce the level of competition in:

• the market for corrugated sheets, and consequently corrugated cases, in Portugal, as the merged entity would have had a strong market position on the sheet market and face limited constraints from competitors.
• the market for corrugated cases in Western France, in view of the strong combined market position of DS Smith and Europac and the loss of competitive constraint that the transaction would cause.

The proposed remedies

To address the Commission’s competition concerns, DS Smith offered to divest the following activities:

• Europac’s box plant in Ovar, Portugal, for the manufacture and supply of corrugated sheets and cases in Portugal; and
• two DS Smith plants in France: “DSS Normandie” and “DSS Normandie (Cabourg)”, which produce corrugated sheets and cases for supply in Western France, in particular in Brittany.

DS Smith and Europac also commit to transfer or assign the applicable customer contracts along with the divested plants.

These commitments fully remove the overlap between DS Smith and Europac with regard to corrugated cases in Western France. The commitments also largely eliminate the overlap as regards the supply of corrugated sheets in Portugal and as such any foreclosure concerns with regard to corrugated cases, so that the transaction will only result in a limited increment in market share of less than 5%.

The Commission therefore concluded that the proposed transaction, as modified by the commitments, would no longer raise competition concerns in the EEA. The decision is conditional upon full compliance with the commitments.