Anticipated acquisition by Norbord NV of The Genk Mill of Agglo NV

Affected market: Manufacture of OSB and particleboard

No. ME/1165/04

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

The OFT's decision on reference under section 33 given on 13 August 2004

PARTIES

Norbord NV (Norbord) is a Belgium subsidiary of Nexfor Inc. Norbord manufactures and supplies different types of panelboard namely: i) particleboard ii) medium density board iii) oriented strand board and iv) faced board products. In 2003, Nexfor's UK turnover was £145.5m, of which £ [ ] million was attributed to oriented strand board and £ [ ] million attributed to particleboard (see note 1).

Agglo NV (Agglo) is a subsidiary of a Belgium company Interlin Invest NV. Agglo owns the Genk Mill in Belgium which produces particleboard and oriented strand board. In 2003, Genk Mill's UK sales for [both products was less than £70 million](see note 2).

TRANSACTION

Norbord proposes to acquire the Genk Mill as a going concern from Agglo, together with approximately 200 staff and the benefit of existing contracts. The transaction is an acquisition of assets and not of shares. Accordingly, there will be no change in the ownership of Agglo. The transaction was notified to the OFT by merger notice on 5 July 2004 and the statutory deadline is 16 August 2004.

JURISDICTION

As a result of this transaction Norbord and the Genk Mill and associated business of Agglo will cease to be distinct. The share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met in respect of the supply of oriented strand board in the UK. The OFT therefore believes that it is or may be the case that arrangements are in progress which, if carried into effect, will result in the creation of a relevant merger situation.

ASSESSMENT

The parties overlap in the European manufacture and supply of certain types of panel board, specifically oriented strand board (OSB) and particleboard. The merged entity will become the second largest manufacturer and supplier of OSB in the European market with a share of supply of [15-25 per cent ](increment [0-10per cent] ). The share of supply of particleboard remains relatively modest (see note 3).

The merged entity will continue to face competition from five other major suppliers of OSB and particleboard. An effective constraint on the merged entity is expected to come from these other major suppliers in the European market.

The markets for OSB and particleboard are competitive with evidence of new mill construction. In addition, the evidence suggests that demand for OSB has steadily increased over the past five years. Although OSB and particleboard pricing is relatively transparent and the products are homogenous, given the evidence of price and cost fluctuations and the number of suppliers that remain in the market the OFT is of the view that co-ordinated effects would not be expected to materialise as a result of the merger in question.

Further, bid data for the last three years shows that for the OSB product, Norbord mainly competes with Smartply and Kronoswiss Group. This suggests that the parties to the merger are not close competitors for large contracts.

Consequently, the OFT does not believe that it is or may be the case that the merger 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 33(1) of the Act.

NOTES

1. Text removed for reasons of commercial confidentiality at the request of the parties.
2. Exact figures removed at the request of the parties.
3. Exact figures in this paragraph replaced by ranges at the parties' request.

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