Completed aquisition by Lenzing AG of Tencel Holding ltd

Affected market: Fibres

No. ME/1076/04

Please note that the full text of the decision can be downloaded by using the link on the right of this page . What follows are extracts regarding the parties, the transaction, background, jurisdiction, assessment and decision.

Please note square brackets indicate figures replaced by a range at the request of the parties

The OFT's decision on reference under section 22 given on 6 September 2004

PARTIES

Lenzing AG (Lenzing) is headquartered in Lenzing, Austria and is one of the world's leading producers of man-made fibres.  Lenzing is active in the manufacture and supply of, among other things, lyocell fibres, which are made from wood pulp and characterized by high wearing comfort and moisture management.  Its production capacity accounts for about 40,000 tonnes of lyocell from its plant located in Austria (actual production in 2003 was about 13,500 tonnes).   Lenzing claims that its lyocell business has never been profitable. Lenzing imported just 8 tons of lyocell into the UK in 2003 which amounted to less than £10,000 sales value.

Tencel Holding Limited (Tencel) was part of the international financial group CVC.  Its production capacity for lyocell amounts to [70,000-90,000] tonnes and it has production sites in Alabama, USA (actual production for 2003 of [15,000-25,000] tonnes), and Grimsby, UK, (actual production [20,000-30,000] tonnes in 2003). Its total UK turnover is less than £ 70 million.

TRANSACTION

On 4 May 2004, Lenzing took over the entire Tencel group of companies including Tencel.  The transaction was notified to the OFT on 9 July 2004 and the administrative timetable expires 6 September 2004. The extended statutory deadline is 1 October 2004. The merger was found to qualify for review in Austria and has been notified to the competent authorities.

The parties signed initial undertakings not to integrate further their businesses pursuant to section 71 of the Enterprise Act 2002 (the Act) on 28 July 2004.

BACKGROUND

In 2001, the EC Commission (the Commission) prohibited the proposed acquisition by CVC (who owned Acordis, of which Tencel was then a part) of Lenzing AG (Comp/M.2187).  The Commission concluded that the relevant product markets at that time were: commodity viscose staple fibres (VSF); spun-dyed viscose staple fibres; viscose staple fibres for tampons; lyocell; and lyocell production and processing technology.  It held that the transaction would have strengthened a dominant position in relation to the supply of VSF for tampons and would have created a dominant position in all the remaining relevant product markets.  It concluded, inter alia, that the merger would create the world's leading supplier of lyocell, with Lenzing accounting for about 25 per cent and Tencel for 75 per cent of total worldwide sales at that time.

JURISDICTION

As a result of this transaction Lenzing and Tencel have ceased to be distinct.  The parties overlap in the supply of lyocell and the share of supply test in section 23 of the Act is met.  The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.


ASSESSMENT

The merged entity would be the major supplier of lyocell and lyocell processing and production technology worldwide.  However, the question at hand is whether the merger has resulted, or may be expected to result, in a lessening of competition that is substantial within any market or markets in the UK.  Lenzing has not been a substantial supplier to, or competitor in, the UK; nor are there grounds to believe that it would become one.  In addition the third party investigation carried out by the OFT revealed that for the majority of customers within the UK a range of fibres (depending on the application) appear to be available and lyocell is only used as long as it is competitively priced.

Consequently, the OFT does not believe that it is or may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.

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