42/12    23 May 2012

The OFT today referred the anticipated acquisition of Metlac Holding S.r.l by Akzo Nobel NV to the Competition Commission for further investigation, following OFT concerns the merger may remove a competitive supplier from the market.

Akzo Nobel and Metlac both manufacture and supply metal packaging coatings. These are used, for example, in the production of beverage and food cans. Between them, the parties supply around 40 to 50 per cent of the European Economic Area (EEA) market. The OFT received a number of third party concerns relating to the loss of Metlac as a competitor in the supply of metal packaging coatings.

The OFT's investigation found that the merging parties are two of four main suppliers of metal packaging coatings in the EEA. Evidence considered by the OFT shows that Metlac represents a significant competitive constraint to Akzo Nobel and is considered to be especially price competitive in the supply of metal packaging coatings by customers.

Ali Nikpay, OFT Senior Director and Decision Maker in this case, said: 'Metlac stands out as a particularly close competitor to Akzo Nobel, the leading player, in this market.

'A number of customers indicated that the removal of Metlac would eliminate a significant competitive constraint to Akzo Nobel and would therefore result in price increases.

'The transaction will benefit from a more in-depth and detailed investigation by the Competition Commission to assess the competitive effects of taking Metlac out of the marketplace'.

The Competition Commission is expected to report by 6 November 2012.

NOTES

1. Akzo Nobel has an existing stake of 49 per cent in Metlac Holding plus an additional stake in Metlac Holding's subsidiary, Metlac S.p.A. (in which they currently hold a 44.4 per cent share), and a call option to buy up the remaining shares in Metlac Holding. Akzo Nobel has decided to exercise this call option which, upon transfer of the shares, would increase its shareholding in Metlac Holding, and in turn Metlac S.p.A., to 100 per cent. Akzo Nobel's current stake in Metlac entitles Akzo Nobel to, amongst other things, board representation and a proportion of Metlac's annual earnings. However, the OFT understands that the two parties operations and activities in the manufacture and supply of metal packaging coatings are undertaken independently. The investigation has shown that Akzo Nobel and Metlac actively compete against each other to supply metal packaging coating products.
2. The following EU jurisdictions have reviewed and cleared the proposed transaction under domestic merger control provisions: Austria, Germany and Cyprus. The transaction is also notified to the competition authorities in Russia, Turkey and Pakistan. 
3. The Reference Test - The OFT has a duty to make a reference to the Competition Commission if the OFT believes that arrangements are in progress or contemplation which, if carried into effect, will result in the creation of a relevant merger situation and the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services. 
4. Under the Enterprise Act 2002 a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million; or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced. 
5. The Competition Commission may extend the 24-week period within which it is required to publish its report by no more than eight weeks if it considers that there are special reasons why the report cannot be published within that period.
6. The text of this decision will be placed in the mergers section as soon as is reasonably practicable.