Acquisition of Sidel gets the thumbs down

The European Commission (EC) has decided to prohibit the acquisition of French-based Sidel by Tetra Laval.

The EC says that the take-over would combine Tetra’s dominant position in carton packaging with Sidel’s leading position in PET plastic packaging equipment creating a dominant position in the market for PET packaging equipment, in particular stretch blow moulding (SBM) machines.

The merger would also strengthen Tetra’s dominant position in carton packaging therefore significantly reducing competition in liquid packaging to the detriment of innovation, choice and competitive prices. The undertakings proposed by Tetra Laval were not sufficient to address the Commission’s concerns.

Tetra is the world’s uncontested leader for carton packaging with an overall market share in Europe of over 80%. Sidel, on the other hand, is the leading manufacturer plastic PET packaging equipment and in particular stretch blow-moulding (SBM) machines.

The Commission’s analysis was reinforced by the fact that European customers lack buyer power. Even the largest customer does not represent more than five percent of sales and most of them are small and medium sized enterprises.

Furthermore, the Commission received complaints from several customers and competitors. PET and carton competitors, including Elopak of Norway and Germany’s SIG and Krones, are also small and therefore unlikely to exert a competitive pressure on Tetra/Sidel.

In view of the particular circumstances created by the fact that Tetra Laval has already acquired virtually the whole of Sidel’s shares, the Commission is prepared to examine the practical arrangements for restoring effective competition. Tetra launched a takeover bid for Sidel SA on 27 March 2001 through its French subsidiary Tetra Laval SA. The proposed acquisition was notified to the Commission for regulatory clearance on 18 May 2000 and the Commission opened a 2nd phase investigation on 5 July 2001.