The European Commission (EC) has cleared the acquisition of Spanish packaging manufacturer Papeles y Cartones de Europac by DS Smith.
Image: Head office of the European Commission. Photo: courtesy of Exfuent.
In June this year, DS Smith proposed to acquire Europac for €1.67bn. DS Smith’s offer consisted of €16.8 per Europac share, valuing the business at €1.9bn on an enterprise value basis.
The EC has approved the acquisition based on certain conditions, including the divestment of various production plants in Portugal and France.
DS Smith and Europac are both manufacturers involved in the production of paper and packaging products, specifically corrugated packaging such as corrugate cases for transporting industrial and consumer goods.
DS Smith is active across the European Economic Area (EEA) and Europac has activities in France, Spain and Portugal.
The investigation of the commission has focused on the markets for corrugated case materials, sheets and cases.
Corrugated case material will be used to produce corrugated sheets, which can be converted into corrugated cases for sale to end-customers.
The EC’s investigation has revealed that the proposed acquisition is expected to reduce the level of competition in the market for corrugated sheets and corrugated cases in Portugal, as the combined entity would occupy a major market position on the sheet market.
Furthermore, the investigation also found that the combined entity will be a dominant player in the market of corrugated cases in Western France.
DS Smith has agreed to divest some operations to address the competition concerns of the commission.
It will divest Europac’s box plant in Ovar of Portugal, which manufactures and supplies corrugated sheets and cases in the country.
The company will also divest its two French plants, including DSS Normandie and DSS Normandie (Cabourg), which manufacture corrugated sheets and cases for distribution in Western France, specifically in Brittany.
In addition, both firms have also agreed to transfer or assign the applicable customer contracts along with the divested plants.
DS Smith produces and markets corrugated packaging and plastic packaging products, while Europac produces and sells paper, corrugated board and corrugated packaging products.