The European Commission has opened an in-depth investigation under the EU Merger Regulation into the planned combination into a new merged entity of Munksjö AB, a Swedish-based manufacturer of high value-added paper products, and the European label and processing business of Ahlstrom Corporation (ALP), a Finnish manufacturer of high performance materials. The two entities would be transferred to a new company, "NewCo", through a series of transactions. The Commission's preliminary investigation indicated potential competition concerns in the markets of pre-impregnated paper ("PRIP") and abrasive paper backings, where NewCo would have high market shares both in the European Economic Area (EEA) and worldwide. The decision to open an in-depth inquiry does not prejudge the result of the investigation. The Commission now has 90 working days, until 29 April 2013, to take a final decision on whether the transaction would reduce effective competition in the EEA.
Commission Vice President in charge of competition policy Joaquín Almunia said: “This proposed merger in the paper industry would remove a competitor from some markets which are already highly concentrated. The Commission needs to make sure that effective competition is preserved and prevent harm to customers, particularly when the only few available sources of supply are at stake."
Munksjö and ALP produce, among others, PRIP, a kind of decor paper ultimately used in the furniture industry; abrasive paper backings, used as inputs for producing abrasive products such as sandpaper, sanding discs and belts; and electrotechnical paper, used for insulation of high voltage submarine cables, transformers, motors and generators.
The Commission’s initial investigation has shown that the proposed transaction would combine two leading suppliers of PRIP and abrasive paper backings, both in the EEA and worldwide. At this stage of the investigation, the Commission has concerns that the remaining competitors in both markets may not be able to exert sufficiently strong constraints on the behaviour of the merged entity. The removal of an important competitor may lead to a reduction of choice for customers and potentially an increase in prices for the products concerned.
The Commission will now investigate the proposed merger in-depth to determine whether these initial concerns are confirmed or not.
The transaction was notified to the Commission on 31 October 2012.
