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Europe: EC approves Ball’s takeover of Rexam

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The European Commission has approved under the European Union Merger Regulation the acquisition of beverage can manufacturer Rexam by rival Ball, subject to the divestment of 12 plants in the EEA.

Ten of these plants produce can bodies, the two others produce can ends.

The two companies supply beverage cans and, to a lesser extent, aluminum bottles, to soft drinks, beer and energy drinks manufacturers.

Beverage cans are manufactured out of two metal parts, a can body and a lid (the can end), and are used to hold liquids such as carbonated soft drinks, alcoholic beverages, fruit juice and energy drinks.

The Commission’s investigation showed that the transaction, as notified, would have reduced competition in the already concentrated markets for beverage cans and risked increasing prices for customers.

Its approval is therefore conditional upon Ball divesting 10 plants making can bodies and two plants making can ends to a suitable purchaser, so as to address the Commission’s concerns.

The business to be divested will have a total manufacturing capacity in the EEA of over 18 billion cans.

Rexam and Ball are, respectively, found as the first and second largest beverage can manufacturers in the European Economic Area (EEA) and also the two market leaders worldwide.

The Commission therefore focused its investigation on competition in the beverage can markets.

The investigation revealed that the transaction, as initially notified, would have significantly reduced competition for customers with filling locations in each of the following areas: Benelux, Central Europe, France, the Iberian Peninsula, Italy, North-East Europe, Nordic countries, South-East Europe, the UK and Ireland.

The proposed takeover, in the absence of remedies, would have eliminated an important competitor and reduced the choice of suitable suppliers in already concentrated markets, which could have led to price increases.

Can-Pack and Crown, the only remaining main players in Europe, would not have posed a sufficient competitive constraint on the merged entity after the transaction.

Moreover, the industry is characterized by high barriers to entry.

Manufacturers need to have a certain scale and geographic spread to compete effectively for the largest volumes and provide the wide variety of can sizes and shapes required by customers in the EEA.

The Commission maintained close cooperation with the Federal Trade Commission in the US and CADE in Brazil, which were also examining the proposed transaction.