Completed acquisition by Bobst Group SA of the Valmet Converting business of Metso Corporation

Affected market: Flexible packaging machinery

No. ME/1508/03

Please note that the full text of the decision can be downloaded by using 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 22 of the Enterprise Act 2002 given on 11 March 2004.

PARTIES

Bobst Group SA (Bobst), a Swiss company, is a global producer and distributor of machines used in the production of packaging, consisting of solid fibre board, corrugated board and foils. In 2002 Bobst had total sales of CHF 1478 million (approx £634 million).

The Valmet Converting Business (Valmet) is part of Metso Corporation, a Finnish company. Metso is a global supplier of process industry machinery and systems with a worldwide turnover of EUR 4.7 billion. The Valmet business concerns the manufacture, sale and servicing of machines and equipment for the manufacture of plastic film and flexible packaging as well as the conversion of paper, which had total sales of EUR 170 million. In 2002, Valmet's UK turnover was approximately (see note 1).

TRANSACTION

The transaction involves the acquisition of the Valmet business which comprises Metso's subsidiaries Valmet Atlas plc (GB), Valmet Rotomec SpA (Italy) and Valmet Converting Center GmbH (Germany), including their respective subsidiaries, and certain assets used or related to Valmet located in the US, Indonesia, Singapore and China. The consideration was approximately EUR 75 million.

OFT considers that a complete submission was received on 17 December 2003 and that the 40-day administrative timetable expired on 16 February 2004.   The parties state that the transaction completed on 21 October 2003 (see note 2).  The statutory deadline for considering this merger has been extended in accordance with section 25(1) of the Enterprise Act 2002.

BACKGROUND

Bobst's rationale for the transaction is to broaden the printing machine products range and develop its business activities in other geographic areas e.g. Asia where Bobst does not have a presence.

The transaction was notified in Brazil in December 2002, and has also been notified and cleared in Turkey, Germany and Spain. The Spanish competition authority considered that it was not necessary to distinguish between the different types of flexible packaging machines because the transaction did not raise any significant anti-competitive effects. Following previous cases relating to the machinery for packaging (see note 3) and the production of flexible packaging products (see note 4) , it considered the geographic scope for supplies should be at least EEA-wide.

JURISDICTION

As a result of this transaction Bobst and Valmet have ceased to be distinct.  The parties overlap in the supply of flexible packaging machines and the share of supply test in section 23 of the Act is met in respect of the supply of slit rewinding machines in the UK.  A relevant merger situation has therefore been created.

ASSESSMENT

This completed merger qualifies on the share of supply test of the Act.  At a horizontal level, the parties overlap in the manufacture and sale of machines used to apply the finishing process to flexible packaging. At a vertical level, Valmet is active in the upstream manufacture of machines used to manufacture flexible packaging but the OFT believes this does not raise any substantive competition issues. Supply and demand side considerations indicate that the relevant frames of reference for analysing this transaction are the manufacture and sale in Europe of: gravure printing machines, flexographic printing machines, coating and laminating machines and slitting-rewinding machines.

The shares of supply and accretions to those shares are not significant and a number of competitors remain post-merger. Some third parties raised concerns about a reduction in the number of major suppliers of flexible packaging machines but enquiries have confirmed that there are a number of existing and potential suppliers. In addition, the OFT believes that some buyer power is present and barriers to entry are not insurmountable.

Accordingly the OFT does not believe that it is or may be the case that the creation of the relevant merger situation has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom for goods or services.

DECISION

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

NOTES

1.  Figures removed at the request of parties.

2. The parties state that the parties ceased to be distinct within the meaning of Section 26 of the Enterprise Act 2002 on 21 October 2003 although completion of the transaction took place on 30 January 2004.

3. Case N-03010 of the Spanish Competition Service and Case IV/M.478.

4. Case N-236 and N-03044 of the Spanish Competition Service and Cases IV/M.2441, IV/M.2840, IV/M.2843 and IV/M.3049.

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