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In-depth Investigation into Ball’s Proposed Acquisition of Rexam

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In-depth Investigation into Ball’s Proposed Acquisition of Rexam

In-depth Investigation into Ball’s Proposed Acquisition of Rexam
July 29
10:26 2015

The European Commission has opened an in-depth investigation to assess whether the proposed £4.43 billion ($6.9 billion) acquisition of Rexam (UK) by Ball Corporation is in line with the EU Merger Regulation. The Commission has concerns that the proposed transaction may reduce competition in the beverage can and aluminium bottle manufacturing industry in the European Economic Area (EEA). The Commission now has 90 working days, until 25 November 2015, to investigate in-depth the proposed acquisition and determine whether these initial concerns are founded. The opening of an in-depth inquiry does not prejudge the final result of the investigation.

Rexam and Ball are, respectively, the first and second largest beverage can manufacturers in the EEA and also the two market leaders worldwide. After the proposed takeover, their combined market shares would be very high at both EEA and regional level and only two other players would remain on the market. The parties are also the two suppliers with the most extensive network of plants across the EEA. After the transaction, the parties would own approximately two thirds of the plants located in Europe.

Commissioner Margrethe Vestager, in charge of competition policy, comments: “Very many of us buy drinks in cans – they are convenient and used everywhere. It is therefore very important that the Commission makes sure that Ball’s takeover of Rexam does not restrict effective competition and so risk price increases that could be passed on to consumers.”

The Commission’s concerns relate to the supply of beverage cans and aluminium bottles throughout the EEA. Customers of Ball and Rexam include both large and small manufacturers of beer, carbonated soft drinks, energy drinks, juices and water as well as bottlers working under contract with drinks manufacturers.

BallPackagingAfter its initial investigation the Commission considers that the remaining competitors would not pose a sufficient competitive constraint on the merged entity. The investigation also suggests that the ability to compete effectively requires both a certain minimum size and a widespread network of production facilities.

Moreover, the industry is characterised by high entry barriers because of the need to ensure sufficiently large customer orders and the significant investment required to build a plant. This makes entry and expansion difficult in a relatively short period of time. The combination of the two largest players is therefore likely to result in price increases for customers and ultimately for consumers.

The Commission will now investigate in depth the proposed transaction to determine whether these initial concerns are confirmed. The Commission will in particular examine the importance of having a sufficiently wide network of production facilities across the EEA and the barriers to entry and expansion.

The transaction was notified to the Commission on 15 June 2015.

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