Thursday, February 28, 2013

EU stops Merger of Tencel and Lenzing Lyocell - Part 4 (2001)

This extract continues on from the last post.  There are two distinct monopolies being created: one in the sale of lyocell products (fibres, filaments films etc) and another in the sale of lyocell production technology and plants.

121. The Commission, having considered these arguments, maintains its definition of a separate product market for the production and processing technology for lyocell (including both staple fibres and filament yarn). 

Firstly, it should be noted that, contrary to the parties [CVC/Lenzing] Reply, the definition of a separate market for technology is in line with consistent Commission practice and cannot therefore be regarded as highly unusual.

122. Secondly, the Commission considers the current activity in this area sufficient for it to form a separate market. Indeed, there appears to be a significant degree of 
demand by potential lyocell producers for lyocell production and processing technology; the parties themselves provide a series of examples in their Reply and also point out that Zimmer AG has been marketing its technology for the last two years.  Moreover, a certain number of licences have already been granted by the parties themselves; the circumstances under which these licenses have been granted (wholly exceptional) and the purpose for which they are being used (do not relate to lyocell fibre production) cannot be decisive for the definition of product markets. On the contrary, the very fact that licences were granted under exceptional circumstances which were not related to lyocell fibre production proves, in the Commission's view, that lyocell production and processing technology on the one hand and lyocell fibre production on the other hand are not inextricably linked with each other and deserve to be assessed separately.

123. Thirdly, not all of the companies and institutes which develop lyocell production and processing technology are at the same time active in lyocell production. As has been stated above (see paragraph 119) and confirmed by the parties in their Reply, the German undertaking Zimmer AG is active in the development and sale of lyocell technology but not in lyocell production; so is the research institute Thuringisches Institut for Textil- und Kunststoff-Forschung e.V. (TITK). The fact that different players are active in the lyocell production area and in the field of lyocell production and processing technology strongly militates in favour of the existence of a separate technology market.

124. The Commission therefore concludes that there is a technology market for lyocell production and processing which is distinct from the downstream market for the production and sale of lyocell.

Wednesday, February 27, 2013

EU stops Merger of Tencel and Lenzing Lyocell - Part 3 (2001)

Back to "Technology" for this extract from the EU Mergers report, signed incidentally by the then Commissioner Mario Monti who has just had a rather torrid time in the Italian elections.  

This is an amplification of the view that the Tencel/Lenzing merger would stifle the development of the technology not only for staple but for filament, film and membranes.

The production and processing technology for both lyocell staple fibres and lyocell filament yarn is entirely distinct from any other fibre production and processing technology. Whereas viscose technology (including environmental compatibility) is well established and readily available, the technology for lyocell production is rather young; it has been developed since the 1970s and has seen its first commercial application in the 1990s. It is characterised by the existence of a large number of patents. Whilst some of the initial patents have already expired, this is not the case for others, mostly those related to the production process and to the treatment of lyocell

119. Both Acordis and Lenzing are key players in this market in which some East Asian companies and the German engineering company Zimmer AG are also active, partly in co-operation with research institutions. Whilst some of these undertakings are at the same time involved in lyocell production, others, such as Zimmer AG, are not. Acordis and Lenzing cross licensed their lyocell technology in 1997.  From this cross licensing agreement it becomes clear that Lenzing and Acordis are already active as sub-licensors and sub-licensees on this market and that therefore there is trade in licenses. The same agreement also substantiates that this market not only includes technology for staple fibre production and processing but also for other lyocell products such as extruded films and membranes and filament. As the technology in these other areas is linked with the technology of lyocell staple fibre production and processing through certain patents common to all areas, these areas of lyocell production and processing technology belong to the same product market.

Moreover, lyocell filament technology has not yet entered the stage of commercial production and consequently competition in this area can only take place on the level of production and processing technology. The Commission's market investigation has furthermore revealed that there is demand for lyocell technology licences.

120. In their Reply, the parties
[CVC and Lenzing] argue that there is no market for lyocell technology in the sense that there is currently no significant licensing of lyocell technology and patent rights, and that it is highly unusual to identify a separate market for technology. Secondly, they contend that the parties themselves are currently not active in sub-licensing and that Zimmer AG is currently the only significant supplier.

(The Commission's response follows in the next post)

Monday, February 25, 2013

EU stops Merger of Tencel and Lenzing Lyocell - Part 2 (2001)

The last post referred to the lyocell technology.  This one refers to the market for lyocell fibres. 

The following paragraph from the EU Final Report of the Hearing Officer for the CVC/Lenzing merger case records the conclusions from consulting lyocell fibre customers about the proposed merger:

63. The market investigation carried out by the Commission has confirmed that there is not sufficient demand-side substitutability between lyocell and other fibres for them to be included in the same relevant market. Indeed, the vast majority of the customers interviewed stated that they were not in a position to replace lyocell in their products at all. According to their replies, certain customers would have to cease manufacturing the product concerned and the vast majority of customers would simply not change anything in the event of an increase of 5-10% in the price of lyocell. The most common reasons for not switching were the specific product characteristics of lyocell and the requirements set by downstream customers. 

The report adds in a footnote that these findings were confirmed by a statement in an internal document submitted by CVC.  Later in the same section:

70. Likewise, there is no supply-side substitutability between lyocell and VSF.Although both viscose and lyocell staple fibres are man-made cellulosic fibres, lyocell is produced in separate plants by an entirely different production process, a solvent spinning process in which the fibre is formed by directly dissolving wood pulp in organic solvents (whereas viscose has to undergo a different chemical process of slurrying and xanthation, which in contrast to the lyocell process involves the formation of a derivative, then dissolving the xanthate in dilute caustic soda before it can be extruded through spinnerettes). Special equipment and machinery are required to produce lyocell. The production technology is highly capital intensive, resulting in lyocell currently being the man-made cellulosic staple fibre with the highest cost of production by far.

Both competitors and customers assume, however, that these production costs might fall significantly once the considerable investment in research and development for this comparatively new technology
will have paid off, given that the lyocell production process is in fact a process involving fewer production steps than the viscose process.

Sunday, February 24, 2013

EU stops Merger of Tencel and Lenzing Lyocell - Part 1 (2001)

A review of the EU documents blocking the proposed Acordis/Lenzing merger (to create "the new entity") reveals the following conclusions on the technology involved in the Tencel/Lyocell part of the merger.
  • The new entity would remain the only player worldwide who is able to license this technology as far as ready-to-produce technology is concerned.
  • No other producer could therefore start lyocell production without entering into a licensing agreement with the new entity or running the risk of patent litigation.
  • Competition in the market for lyocell production and processing technology would therefore be eliminated as far as ready-to-produce technology is concerned. 
  • The effect of such a situation would not only be the slowing down of technological development but also the likely alignment of any new entrants behaviour in lyocell staple fibre production with the new entity's behaviour, making it likewise impossible for any new entrant to effectively challenge the new entity's dominant position in lyocell staple fibres.
  • This slowing down of technological development would be due to two factors: firstly, the immediate incentive of the new entity to invest in technological developments, and thus lower barriers to entry, would be reduced by the "free rider" problem it could face with regard to the licensee. 
  • Whilst this freerider problem also exists in regard to the current competitive situation between Acordis and Lenzing, it is effectively counterbalanced by the technological rivalry between both companies, which provides an incentive to innovate. 
  • Post-merger, the incentive to innovate would therefore be reduced.
Case No COMP/M.2187 CVC/Lenzing

(More to come)

How the EU justified the same merger 3 years later will be the subject of later posts.

Wednesday, February 20, 2013

Geoffrey Owen's Tencel lyocell history extracts (Part 6 - Lenzing)

Geoffrey Owen of the Department of Management, London School of Economics presented a paper at SPRU in October this year entitled "Innovation in the man-made fibres industry: corporate strategy and national institutions." It is based on unpublished material made available to the author by Akzo Nobel, Lenzing and Courtaulds (amongst others) and is available in full here on the web as a PDF file. It contains excellent sections on Tencel lyocell development history, the sixth extract of which is reproduced below.  This final part deals with the early history of Lenzing leading to their lyocell development.

The rayon factory in the town of Lenzing, situated in Upper Austria between Salzburg and Linz, was built in 1938 as part of the Nazi authorities’ self-sufficiency programme; a number of plants were built in Southern Germany and Austria in order to replace cotton imports. The rayon factory was adjacent to an existing pulp mill, which became the main source of woodpulp; the mill was bought by Lenzing in 1969. The integration of pulp and rayon production gave Lenzing a cost advantage over rayon producers such as Courtaulds which obtained their wood pulp from distant suppliers.

After the war the company was controlled by two partially state-owned banks, Landerbank and Creditanstalt. Subsequent mergers in the Austrian banking industry led to the creation of Bank Austria, which became the principal shareholder. Lenzing was listed on the Vienna Stock Exchange in 1985 but only about 10 per cent of the shares were offered to outside investors. Lenzing was expected to make profits and to pay dividends but it was not a shareholder-driven company. As the principal employer in its region, it had a social responsibility which influenced its strategic decisions, not least its determination to make the best possible use of the site. A drawback of the site was the lack of water and Lenzing had to invest in costly techniques to
reduce its water consumption while also meeting the environmental rules laid down by the regional government. The result was a cleaner manufacturing process, giving the company the confidence to continue improving the viscose process at a time when other producers were cutting back. 

Lenzing also developed speciality cellulosic fibres, of which the most important was modal; launched in 1964, this was a “high wet modulus” fibre, stronger than rayon and suitable for hightenacity applications.  Lenzing took a cautious approach to synthetic fibres. It made a brief foray into acrylics and later into polyester in partnership with Hoechst, but was never a major producer. Because of its limited involvement in synthetics, Lenzing was less affected than most other European fibre producers by the over-capacity crisis of the mid-1970s. At the end of that decade it made what turned out to be an important decision to participate in an Indonesian viscose plant with the Indian Ashok Birla group. The Indians had asked for technical assistance and in exchange Lenzing secured a minority interest in the new company. This plant, which started production in 1982, gave the Austrian company a foothold in a region where demand for man-made fibres was growing fast, and paved the way for subsequent investments in Asia; Lenzing later acquired majority control of the Indonesian company.

Like Courtaulds, Lenzing was aware of possible alternatives to the viscose process and it initiated research into solvent spinning during the 1980s. A pilot plant was built in 1990 and five years later Lenzing decided to manufacture its own lyocell fibre, a direct competitor to Tencel; production began in 1997. In 2004 Lenzing bought the ex-Courtaulds Tencel business from CVC.This added the two Tencel plants which Courtaulds  had built, in the UK and the US, to Lenzing’s existing plant in Austria. All three factories were subsequently expanded, and in 2010 Lenzing announced plans to build a new Tencel plant in Austria. The Tencel takeover was one of a series of moves which gave the Austrian company a more international dimension. The Indonesian plant was enlarged and in 2005 the decision was taken to build a viscose plant at Nanjing, China; another Asian viscose plant, in India, is expected to come on stream in 2013. Lenzing is now one of the two leading producers of cellulosic fibres, the other being the Aditya Birla group in India. Nearly 60 per cent of its sales come from Asia, but the heart of the company remains the original site in Lenzing; some 3,000 out of the company’s total labour force of 6,600 are employed there. 

Although Lenzing has diversified on a small scale outside fibres, principally in plastics, its strategy since the war has been based on the belief that, with continuous investment in new technology and new product development, cellulosic fibres will remain a good business to be in. This consistency has been reinforced by the company’s ownership structure. In 2000 Bank Austria sold its shares to an Austrian foundation, the B & C Private Foundation, whose mission was to act as a long-term core investor in Lenzing, with a commitment to maintain the company’s role in the Austrian economy. In 2011, as part of a capital reconstruction which involved the issue of new shares, B & C reduced its share of the voting shares to 68 per cent and the free float was increased to about 33 per cent.  Part of the motivation was to make Lenzing shares more accessible to international investors. 

Monday, February 18, 2013

Lenzing's purchase of Tencel approved by Austrian authorities (2005)

LONDON (CNI)--Lenzing’s bid to acquire the Tencel cellulose fibres group has finally been approved by the Austrian Cartel Court, the Austrian fibres group said Wednesday.

The deal was originally announced in May 2004, subject to regulatory approval. Provisional agreement for the takeover had been given by the Austrian anti-trust authorities in February 2005 on the basis that a number of conditions and restrictions would be met by Lenzing.

These were addressed by the company and, it said in a statement: “The anti-trust authorities had no objections to releasing the modified project.”

By: Mark Whitfield

13 April 2005 16:46 [Source: ICIS news]

Chronologically Mark marks the end of our story.  Game over.  

We will however fill in some details for the Year folders, hope for more comments from those involved, more "Likes" and "+1's", add any news as it appears, and tidy up.

Saturday, February 16, 2013

Lenzing’s Tencel Takeover to Proceed (2005)

Lenzing’s takeover of Tencel, its rival in the global market for lyocell cellulose fiber, had been blocked by Austria’s Supreme Court on competition grounds. However, the Austrian company says it has reached a compromise with the country’s antitrust authority, according to which the acquisition will be allowed to proceed within the next one to two months.
The merger, proposed 10 months ago, would give Lenzing a complete monopoly in the European and North American lyocell markets, where Tencel is the only other producer.
The Supreme Court upheld a decision by the Higher Regional Court of Vienna, Austria’s antitrust authority, that the acquisition from the investment group CVC Capital should be barred because it creates a monopoly in the fiber.
Under the compromise, Lenzing has agreed that over the next six years it will not close its 40,000 ton-per-year lyocell plant at Heiligenkreuz, northern Austria, thereby safeguarding 180 jobs. It has also pledged not to move a lyocell R&D unit out of Austria.
“Under Austrian competition law, a ban on an acquisition can be waived if a compromise is reached which benefits the Austrian economy,” says a Lenzing official.
The takeover did not have to be backed by the European Commission, the European Union’s main competition authority, because Tencel’s annual sales of €100 million ($133 million) were below the threshold for EU approval.
The only national antitrust authority, besides Austria’s, to investigate the acquisition was the Office of Fair Trading (OFT) of the UK, where Tencel is based. It accepted Lenzing’s argument that the merger would not form an illegal monopoly because lyocell has to compete against viscose, cotton, polyester and other fibers.
The OFT enquiry found that in 2003, Tencel produced a maximum of 55,000 tons of lyocell, equivalent to 60 to 80 percent of the total capacity of its plants at Grimsby, UK, and in Alabama. Yet it accounted for 75 percent of total worldwide sales of the fiber, according to the OFT.

Friday, February 15, 2013

New Lenzing TENCEL®-Jumboline (2013)

New TENCEL® Jumboline
New TENCEL® Jumboline
This is a repeat of the news, recorded under the Aims tag above, which prompted the development of this blog in July last year.  The capital costs are now down to $2700/annual tonne compared with the over $4000/annual tonne being projected by Courtaulds for their 4th (Asian) factory in 1999.  All the savings from the Lenzing infrastructure on the old viscose site and the locally grown and pulped wood will be coming into play. This operation will get close to the original Courtaulds Research vision for Tencel in the 1980's.  

It's interesting also to see the Courtaulds Tencel 1990's launch market (denim) getting a mention again and hopefully this now means the more predictable mass-market denim rather than the "Armani" denim market on which so many unrealistic expectations were built in the mid 90's.

Lenzing is constructing a jumbo TENCEL® production line at the plant in Lenzing. It will go into operation in 2014.
The most modern fiber plant worldwide
The most modern fiber production line in the world is currently being built in Lenzing, Austria. The combined expertise and technologies of the Lenzing and the Tencel Group, which were recently merged, are being applied for the first time in the construction of the state-of-the-art TENCEL® plant. The new plant marks an exciting new chapter in TENCEL® technology.
“TENCEL® represents the greatest technological innovation in the man-made cellulose fiber industry since the invention of the Viscose fiber around 100 years ago,” explains Dieter Eichinger, Vice President Business Unit Textile

Thursday, February 14, 2013

Lenzing modify application for Tencel takeover (2004)

Points to note:  
  • Heiligenkreuz employed 180 people
  • Lenzing Lyocell R&D employed another 130 people
  • Any remaining Tencel R&D would be moving to Austria

LONDON (CNI)--Austrian fibres group Lenzing said Friday it will file a modified application for its acquisition of the Tencel cellulose fibres company in the next few days.

The Austrian Supreme Court on 14 February confirmed a 28 October decision by the anti-trust authorities restraining Lenzing from the acquisition.

However, an agreement was made with the anti-trust authorities prior to the ruling on conditions and limitations to be included in a revised application.

A Lenzing spokeswoman told CNI the company had not agreed that the acquisition would lead to a monopoly in its markets. Austrian law, however, contains a provision to safeguard the country’s economy against concentration of manufacturing segments.

She added that the company in its new application would have to promise to safeguard for six years the 180 jobs at its 40 000 tonne/year fibre production plant at Heiligenkreuz, Austria.

Lenzing also had to guarantee that its Lyocell research and development (R&D) business, which employs 130 people, will stay in Austria.

Since agreement has been reached on the terms, the company expects a swift approval of the merger. The spokeswoman said this would probably mean a final decision would be made in four to six weeks. 

Wednesday, February 13, 2013

Austrian court moves to block Lenzing's Tencel takeover (2004)

LONDON (CNI)--Austrian fibres group Lenzing said on Friday it is to appeal against a decision by the Higher Regional Court in Vienna to block its acquisition of the Tencel cellulose fibres company.

The court, acting in its capacity as Austria's antitrust authority, has ruled that the deal breaches competition rules.

Lenzing, which formally took over Tencel in May this year, said it would appeal against the decision to Austria's Supreme Court.

In a statement sent today to CNI, Lenzing chairman Thomas Fahnemann said: "We are quite surprised about the court's decision. This applies all the more, as other antitrust authorities such as the UK's Office of Fair Trading (OFT), the German Bundeskarteliamt and the US antirtust authority did not object to the acquisition."

A spokeswoman for Lenzing told CNI that a more detailed response to the Higher Regional Court ruling would be made next week following receipt of the detailed written decision.

The Tencel acquisition has further strengthened Lenzing's position in the high value cellulose fibres market and combines former rivals that first developed the revolutionary wood fibre discovered in the late 1980s.

Tencel has a total nominal capacity for Lyocell cellulose-based fibre of 80 000 tonne/year at plants in the US and the UK. Its sales in 2003 were Euro100m ($120m). Lenzing has a production capacity for Lyocell of about 40 000 tonne. Its 2003 Lyocell sales have not been disclosed.

Fahnemann said in announcing the acquisition that it marked a milestone for the Lenzing group. “We are tripling our Lyocell capacity and thereby reaching the critical size that is necessary for a sustainable and profitable Lyocell operation.”

Tuesday, February 12, 2013

Lenzing to keep all 'Lyocell' capacity to meet demand (2004)

LONDON (CNI)--Austrian fibres producer Lenzing confirmed on Thursday that it plans to keep all Lyocell fibre production plants running to meet current demand.

The assurance was given after Lenzing's announcement yesterday that it had bought rival producer Tencel for an undisclosed sum from private equity group CVC making it the world’s pre-eminent producer of the fibre.

The deal combines the two major producers of the specialty wood pulp based fibre currently finding use in non-woven applications and in textiles.

Lenzing management board chairman, Thomas Fahnemann, told CNI in an interview that current demand for Lyocell is strong in Asia. Fahnemann’s company developed its Lyocell fibre at the same time as Tencel(then the brand name of the product created by former UK fibres producer Courtaulds).

Lenzing is producing between 25 000 tonne a year and 27 000 tonne a year of Lyocell fibre at its plant at Heiligenkreuz in Austria, he said, as it starts up a second 20 000 tonne a year production line. About 70% of output from Heiligenkreuz is being sold into Asia textile markets, he added.

Lenzing produces Lyocell for textiles and other fibre segments while the Tencel business – which comprises two plants (in Mobile, Alabama in the US and at Grimsby in the UK) with a combined capacity of 80 000 tonne/year and associated technology – makes fibre largely for non-wovens.

There is not a lot of overlap between the two businesses, Fahnemann said, and he is clearly keen to see further technological development from the combined operations.

Lyocell is the first new fibre developed in more than 50 years. Created in the late 1980s, it is described as being still in the early stages of its life cycle and further progress is expected, particularly on the cost of production. The explosion at the Heiligenkreuz plant in November last year (2003) demonstrated that there is still more to be learned about that process.

Fahnemann believes Lenzing has now achieved the critical mass to be competitive in Lyocell and the technical knowhow to further develop the product. Particularly, the company will be addressing cost of production issues, he said.

Monday, February 11, 2013

Lenzing acquire Tencel (2004)

Points to Note:
  • This take-over will be approved by the EC because Tencel's sales in 2003 were worth less than  €100 million ($119 million)
  • "This is by far the best solution..." (It would be interesting to know what Lenzing paid CVC.)
  • "The fastest growing part of the [Tencel] market is wipes".
  • New capacity expected soon in Asia.
Lenzing AG has agreed to acquire, for an undisclosed sum, Tencel, its main competitor in the growing market for lyocell cellulose fiber, in which both companies are facing the prospect of strong competition from new Asian producers.

Although the deal gives Lenzing a monopoly in lyocell capacity in both Europe and North America, the takeover is unlikely to be barred by competition authorities. Tencel’s sales of around €100 million ($119 million) in 2003 are below the threshold above which its acquisition would have to be approved by the European Commission (EC).
Three years ago, the EC blocked a move by CVC, the international financial group, to take over Lenzing and merge it with its fibers subsidiary, Acordis, of which Tencel was then a part.
“We’ve examined the competition implications very carefully,” says a Lenzing spokesperson. “The deal is totally different from the one which was proposed three years ago.”
“Not only is Tencel not big enough to come under antitrust rules, but it formed only a small part of what was Acordis, whose major business like Lenzing’s was viscose fibers,” she adds.
UK-based Tencel, which has a total of around 60,000 tons per year of operating capacity in Mobile, Ala., and in Grimsby, England, was last year spun off from Acordis in order to make it easier to divest.
“Our owners have been trying to dispose of Tencel for the last three years,” says Mike Proctor, chief executive of Tencel whose fiber is marketed under the Tencel brand name. “This is by far the best solution for all stakeholders.

Geoffrey Owen's Tencel lyocell history extracts (part 5)

Geoffrey Owen of the Department of Management, London School of Economics presented a paper at SPRU in October this year entitled "Innovation in the man-made fibres industry: corporate strategy and national institutions." It is based on unpublished material made available to the author by Akzo Nobel, Lenzing and Courtaulds (amongst others) and is available in full here on the web as a PDF file. It contains excellent sections on Tencel lyocell development history, the fifth extract of which is reproduced below.  This deals with the early history of Courtaulds putting the Tencel development in context.  The final extract will do the same for Lenzing and their lyocell.

Founded in 1816, Courtaulds became one of the country’s leading silk weavers, but by the end of the century its main product – mourning crepe – was in decline and new sources of growth were needed. In 1904 it acquired the patents for the viscose process. A factory was built in Coventry, and over the next few years Courtaulds established itself as the world’s leading rayon producer. It was the first European company to start rayon production in the US; its American subsidiary accounted for a large share of its profits in the inter-war years.  

Following the invention of nylon, Courtaulds was eager to get into synthetics, and in 1940 it formed a joint nylon venture with ICI. (ICI had a patent-sharing agreement with DuPont and thus had access to the American company’s nylon technology.) However, it was kept out of polyester by ICI, which was the principal patent holder, and although Courtaulds launched its own acrylic fibre, Courtelle, in 1959, it was still heavily dependent on slow-growing cellulosic fibres. Partly for that reason, it diversified into other industries, principally paints and packaging. It also had a small textile business, derived from its earlier vocation as a silk weaver. 

The diversification drive was stepped up in the mid-1960s, following an abortive attempt by ICI to take over Courtaulds. The new management which took control of the company after the bid adopted a policy of forward integration, investing on a large scale in textiles and clothing in order to secure captive outlets for its fibres. The company also made further acquisitions outside fibres, principally in paints. A new business that was started in the 1960s, based on licensed technology, was carbon fibre, which is described more fully in the next section; carbon fibre later formed part of a new division, Courtaulds Advanced Materials.

The investment in textiles and clothing proved to be a serious mistake and in the mid-1970s Courtaulds was in financial trouble. Many of its textile mills and clothing factories could not compete with imports from low-wage countries; cutbacks in capacity were unavoidable. In fibres Courtaulds had been successful with Courtelle but still had a big commitment to cellulosics, the outlook for which looked unpromising. Of its various diversifications only paints had done well. 

What followed in the 1980s was an attempt to reposition the company, aimed at businesses in which Courtaulds had, or could reasonably hope to create, a competitive advantage. Textiles and clothing were demerged into a separate company, Courtaulds Textiles; several downstream chemical businesses, principally in coatings and advanced materials, were acquired; and a
woodpulp mill in South Africa which had been the principal supplier to Courtaulds’ rayon factories, was sold. Fibres might have been divested during this period, but Courtelle was profitable, and the company had developed a new cellulosic fibre, based on the solvent spinning process (see below),
which appeared to have excellent prospects. In 1990 the company decided to manufacture the new fibre, branded as Tencel, in the US; the factory came on stream in 1992. 

By the mid-1990s Courtaulds had two main businesses, paints and fibres, of roughly equal size and at this point the company’s financial position began to deteriorate. Profits from the older fibres had collapsed, while sales of Tencel, after a promising start, were slowing down. Several of the acquired businesses were performing poorly. The best part of the company was the paints division, and it attracted the attention of international paints companies which were seeking to enlarge their stake in this industry. In 1998 Akzo Nobel, the Dutch company, launched a successful takeover bid for Courtaulds. Its only interest was in paints; the fibres business, including Tencel, was later sold to CVC, a private equity firm.

Seismic Changes Part 4: Birla and the Future (2004)

This is the last part of an article written at the time of the Lenzing take-over of Tencel and reviews the state of man-made cellulosic fibres at that time.  Click here to go to the first part.

Birla Viscose: a new line and a new process dedicated to nonwovens (Continued from part 3)

One of the Thai production lines has been uprated to make a better fibre for the Western nonwoven markets and at the time of writing they are starting up a completely new 20,000 tonne/annum line dedicated to the same sector.  This line is an addition to the 90,000 tonne/annum Indonesian plant and has been designed to use a unique zinc-free process developed by Birla Research at their HQ in Nagda[2]India.  Zinc became a key ingredient of viscose spin-bath chemistry back in the second decade of the 20th century to allow the production of stronger, more extensible fibres and has stayed there ever since.  Birla correctly argued that zinc and the traces of other heavy metals which can accompany it in raw material form is not necessary for disposable nonwoven production.  According to Shubkham Varshney, Birla’s Vice President of International Business, the zinc-free fibre as produced in Indonesia has a tenacity of 2.6 gms/denier with 20% extension (dry) and somewhat brighter appearance due to the C-shaped cross-section which emerges from the zinc-free system.  This lustre may be undesirable in nonwovens so titania is used to kill it, but other cross-sectional effects such as increased softness and bulk remain apparent. 

In addition to developing the new zinc-free process, Birla Research has now completed its new pilot line for modal fiber production and also claims to have their lyocell pilot line operating successfully.

New Plant in China?

Mr Varshney also revealed that Birla are exploring greenfield sites in China with a view to building a major new viscose plant, with a 30,000 tonne/annum  output first phase.  This would be the first line in China to be based on 100% imported wood pulp cellulose and hence be capable of much higher quality than the smaller Chinese plants which have been designed to use cotton-linter pulps.  The fibre would be a quality product for export and for China’s rapidly expanding hydroentangled nonwovens industry.

What does the future hold?

After decades of declining sales, the nonwovens-led turn-around in the fortunes of man-made cellulosics should continue.  Global use of the fibres is likely to increase providing their price relative to cotton and polyester remains much the same as in the last year.  Wet-wipe demand for cellulosics will continue to rise for several years yet, but if rayon prices increase too much the pressure to develop the harder to use cotton blends and harsher woodpulp wipe-blends will intensify. 

Sunday, February 10, 2013

Explosion and fire halts Lyocell output at Lenzing plant (2003)

LONDON (CNI)--Austrian fibres group, Lenzing, may declare force majeure on production of its cellulose fibre Lyocell following an explosion at its 20000 tonne/year capacity Heiligenkreuz, east Austria, plant.

A company spokeswoman told CNI on Tuesday that an explosion earlier today resulted in a fire in which four people suffered minor injuries. "Production has stopped and we are considering a force majeure for production from this plant," she added. Lenzing was unable to quantify the extent of the damage or estimate when production might resume. She could not say if the company's plans to double capacity at the plant by the end of 2003 have been jeopardised by the incident.

Lenzing said a team of experts is investigating possible causes of the explosion. Repairs will begin when the cause of the blast has been identified, the company added, so that production can resume as soon as possible.

Thomas Fahnemann, chairman of the board of management and Franz Raninger, member of the management board, will inspect the site tomorrow.

(An early indication that Lenzing's lyocell process may differ from Courtauld's in how it controls the exotherms which can occur when the solution of cellulose in amine oxide gets too hot.)

Seismic Changes in Cellulosic Fibres - Part 3 (2004)

Prior to 2000 Tencel was produced as a textile fibre, with a few nonwovens producers tolerant of less than optimal fibre presentation doing pioneering process and market development and proving that it really did perform as advertised in the final nonwovens.  Now there is a high-crimp nonwoven version of the fibre, coded HS260 (because it has run on the latest injection cards at 260m/min) which is available in deniers between 1.25 and 3, finished specially for hydroentanglement and dulled with up to 1.2% titania.  Using these fibres, the pioneer converters are now expanding rapidly and anyone who uses viscose in nonwovens is keen to try Tencel.  45% of nonwoven Tencel is currently bonded by hydroentanglement, 35% by needling, 10% by latex and the remainder is short cut to 6mm and sold to wet-laid nonwoven producers and special papermakers.

Lenzing’s success in nonwovens has been with viscose rather than lyocell.  Modal fibre apart, 50% of their 200,000 tonne Austrian viscose output now goes to nonwovens, up from about 15% before the Acordis factory closures mentioned above.  Their 120,000 tpa Indonesian plant is dedicated to the Eastern textile markets, and last year they pulled out of the USA; “Liberty Fibers” being created from their Lowland operation in a management buy-out (see below).   They report strong ongoing business and are investigating expansion in China via their office in Shanghai, but refusing to be drawn on whether this venture would be viscose, modal or lyocell based.  One notable nonwoven success with Lenzing Lyocell has been the development of a new application (for cellulosics) in duvet and quilt fillings.  This sector, initially opened up by Courtaulds Research using pilot-plant fibre, requires a silky-soft heavy denier lyocell which Tencel were not able to make on the production units.

Liberty Fibers

Liberty Fibers slipped into Chapter 11 shortly after Lenzing pulled out, and

Saturday, February 9, 2013

Austria's Lenzing buys Tencel; wins 'Lyocell' battle (2004)

LONDON (CNI)--Austrian fibres group Lenzing on Wednesday said it had taken over the entire Tencel group of companies from Corsadi BV, part of venture capital group CVC, for an undisclosed sum.

The acquisition, which takes effect from 4 May, further strengthens Lenzing’s position in the high value cellulose fibres market and combines the two former rivals that first developed the revolutionary wood fibre discovered in the late 1980s.
Tencel has a total nominal capacity for Lyocell cellulose-based fibre of 80 000 tonne/year at plants in the US and the UK. Its sales in 2003 were Euro100m ($120m). Lenzing has a production capacity for Lyocell of about 40 000 tonne. Its 2003 Lyocell sales were not disclosed.

“The acquisition marks a milestone for the Lenzing Group,” Thomas Fahnemann, Lenzing managing board chairman said. “We are tripling our Lyocell capacity and thereby reaching the critical size that is necessary for a sustainable and profitable Lyocell operation.”

Lenzing expects to use the three available Lyocell production sites more flexibly in future to react to market demand.

The deal combines marketing capabilities and brand names for the wood-based product as well as technical know-how. Lenzing and Tencel developer - former UK fibres and coatings company Courtaulds - were at loggerheads through the latter half of the 1990s developing technology, production and markets for the new product.

Commenting on this deal, Fahnemann said he expected “major stimuli” from joint development work “from the broad mutual exchange of experience and technology that has now become possible”.

Tencel was planned to be combined with Lenzing in 2001 when CVC bid for an 80% stake in the Austrian company, wanting to merge it with its man-made fibres business former Akzo Nobel unit Acordis. That large deal was, however, blocked by European Union (EU) competition authorities and Acordis subsequently broken up.

Lyocell is the generic name for fibres made from wood pulp by a direct solvent, closed-loop cycle process. Lenzing markets its fibres under the ‘Lyocell by Lenzing’ brand. Tencel is the brand name for Tencel groupLyocell fibre products.

Friday, February 8, 2013

Seismic Changes in Cellulosics: Part 2 - Tencel for Nonwovens (2004)

After CVC’s failure to acquire Lenzing and what appeared to be the closure of one too many of their viscose plants, they were clearly no longer likely to dominate the world’s rayon supply.  Acordis as a whole or in parts was put up for sale and whilst offers for the whole company were considered no deal was concluded.  Late last year, CVC created Corsadi, collecting the arguably more saleable parts[1] of the Acordis group within a financial structure more likely to encourage a sale.   Shortly afterwards it became apparent that Lenzing were interested; an article by the Austrian APA-OTS agency on 25/2/2004 apparently confirmed this, but neither company would comment.  Finally the Tencel-only deal was the talk of the IDEA04 nonwovens show in Miami, and the official press release emerged several days later on May 5th.

So, here we are at the start of a new era in cellulosic fibres.  Let’s take stock.

Tencel by Lenzing

By acquiring Tencel, Lenzing add a nominal 80,000 tonnes of lyocell capacity to their 40,000 tonnes at Heiligenkreuz, to give 120,000 tonnes potential production from 3 plants on two continents.  With the original Tencel factory still in mothballs in Mobile, and with Lenzing’s second 20,000 tonne stream at Heiligenkreuz still ramping up, the actual fiber availability is probably 30,000 tonnes below the nominal, but this will change fast.  Acordis would have liked to re-open the original Tencel plant some time ago but had to await acquisition by a well-financed forward-looking fibre company.  This has now happened and it is difficult to see this capacity remaining idle for long, because like viscose, the lyocell business is booming due to the high demand

Thursday, February 7, 2013

Seismic changes in man-made cellulosics: Part 1 - Lenzing takes Tencel (2004)

Here is Part 1 of the full text of an article from International Textiles Bulletin at the time of the Lenzing take over of Tencel. Points to note:

  • Both CVC and Lenzing had expected the 2001 take-over of Lenzing to be allowed.
  • Maybe to make the deal more palatable to the authorities, CVC closed their 2 best viscose operations (Mobile - Alabama and Grimbsy).
  • The closures came at time when it was apparent that the viscose revival which had commenced in 1999 was real, and driven in part by demand for viscose in the new hydroentangled nonwoven wet-wipes.
  • The Mobile viscose plant was a leading supplier of fibre for nonwovens and, strangely, was closed in order to keep what we thought was the less efficient and more polluting Lenzing Lowland plant open.  (More info needed here)

The long-rumoured acquisition of  Tencel from Acordis by Lenzing has at last been confirmed in a move that finally brings together the operations of the companies whose patents were pooled following an acrimonious battle over the rights to lyocell technology in the closing years of the last century.  Ever since Acordis’s major shareholder, CVC Partners tried – and failed - to capitalize on their acquisition of the old fibre businesses of Courtaulds and Akzo Nobel by adding Lenzing to the family, the industry has been waiting for this sort of rationalisation.

In October 2001 the European Commission prohibited the acquisition of Austria’s Lenzing by the UK’s CVC Partners Group Ltd, but only after plant closures apparently made in the anticipation of such a deal going through.  In April 2001, Acordis decided to close its Mobile viscose plant, one of the largest and lowest cost viscose fibre operations in the Western World, leaving the ageing Lenzing Lowland plant as the only source of viscose staple on the North American continent.   Acordis had earlier announced the  closure of Grimsby, the last viscose staple plant in the UK, and another remarkably efficient converter of wood cellulose into fibres.  Both Mobile and Grimsby specialised in low cost fibre for the world nonwoven market, leaving the Acordis Kelheim viscose plant, traditionally a textile fibre plant, as the only remaining Acordis source for the nonwovens industry.  

With the market for viscose in textiles declining in both Europe and America, some rationalization was inevitable, but to those observers expecting the nonwoven demand for viscose to rise on a wipe-fuelled boom, taking out the two key nonwoven plants seemed odd.  Lenzing’s Austrian plant had also specialised in textiles, and for many years Lenzing had been  a poor second to Courtaulds, and then Acordis in nonwoven market supply.  But the Acordis viscose closures left a vacuum into which Lenzing was sucked, along with Tencel and lyocell, and Birla.  Birla, India’s and the world’s biggest viscose producer realised that if they could change some of their enormous textile viscose capacity to supply European and American nonwoven requirements, they too had a rare opportunity to break into new and growing markets.

(Click here for Part 2..)

Wednesday, February 6, 2013

Acordis plans disposals following EC ruling (2001)

LONDON (CNI)--Dutch-based synthetic fibres business Acordis confirmed on Wednesday that it plans to dispose of the four business divisions which would have been merged with Austrian fibre maker Lenzing had the merger not been blocked by the European Commission (EC).

Earlier today the EC told Acordis owner CVC Capital Partners that it could not approve the deal on the grounds that it would have created a dominant position in a number of fibres markets, especially viscose and lyocell staple fibres and technology.

All three players in the blocked takeover expressed their dismay at the EC's decision.

A spokesperson for UK-based private equity capital company CVC said: "This would have been the perfect relationship and we're disappointed. We have concerns that these companies' market share in Europe is at risk from Southeast Asian imports."

The company added in a statement: "The synergies resulting from the planned transaction would have significantly improved both the competitive position of the merged company and its customers."

Acordis reacted by saying it still intends to dispose of the four divisions which would have become part of ‘NewCo’, a separate company to have been formed following the merger. It confirmed that plans to establish 'NewCo' had been dropped.

'NewCo' would have combined the Lenzing business with Acordis' cellulosic fibres unit Tencel, its viscose staple fibres operation based in Kelheim, Germany, the Enka viscose filament business and industrial rayon yarn maker Cordenka.

Acordis said today that Tencel and its viscose staple fibres operations will be combined immediately under Tencel's existing chief executive Mark Lejman.

Tuesday, February 5, 2013

EC Blocks CVC Takeover of Lenzing (2001)

The European Commission has blocked a proposed takeover of Lenzing AG by CVC Capital Partners, the private equity company that already controls Acordis, the other major European viscose producer.

After a four-month investigation, the Commission concluded that the deal would have created monopoly or dominant positions in several fiber sectors. The review was carried out in close co-operation with the Federal Trade Commission (FTC) in the US, where Lenzing and Acordis have viscose and lyocell capacity.

The Commission claimed that a merger of Lenzing and Acordis would have had a European market share in commodity viscose of over 55 percent and over 80 percent in spun-dyed viscose and viscose for tampons.

In the production and technology licensing of lyocell, the combination would have led to a worldwide monopoly, since they are the only two global manufacturers of the new cellulosic fiber, according to the Commission.

By eliminating Acordis' strongest competitor in viscose in Europe, the merger would have left only three smaller viscose producers: Sniace of Spain, Svenska Rayon of Sweden, and Saeteri of Finland.

The Commission dismissed as inadequate CVC's offer to issue non-exclusive licenses for tampon viscose and lyocell and to arrange the toll manufacturing of lyocell for a licensee.

Bank Austria, whose 80 percent stake in Lenzing was being acquired by CVC, now plans to place the shares in a holding company where it already has other industrial stakes ready for disposal.

Following the Commission's decision, Acordis has been reorganized so that its viscose staple and Tencel lyocell businesses will be combined in a single operation to be based at Kelheim, Germany.

"New products variants are about to be launched in the non-woven sector, and the prospect of being able to market Tencel and viscose alongside each other is extremely exciting," says Mark Lejman, currently CEO of Tencel. He will head the new operation.

Monday, February 4, 2013

CVC buys 80% stake in Lenzing for Euro270m (2001)

LONDON (CNI)--CVC, the UK private equity company with a growing chemicals and fibres portfolio, said Thursday it is to buy Bank Austria's 80% stake in Austrian fibres maker Lenzing.

It plans to create a new company combining Lenzing with the cellulose-based activities of Acordis, the Dutch fibres manufacturer in which it has a 64% stake.

Bank Austria announced today it is to sell its 80% stake in Lenzing to CVC for Euro90/share in cash, or a total of Euro270m ($250m). The transaction, which will give the bank a Euro52m capital gain, is subject to regulatory approval.

The bank said the new Lenzing/Acordis combination will be the world's largest producer of cellulose fibres with sales of Euro1.4bn. CVC said it expects to expand the Lenzing production sites in Lenzing and Heiligenkreuz, Austria.

Acordis said the activities it will sell to the new company are: viscose staple, Tencel, viscose filament (Enka), acetate filament (Novaceta, a 50:50 joint venture with Italy's Snia), industrial rayon yarn (Cordenka) and the acrylic fibre operation in Kelheim, Germany. A company spokesman said these businesses generate revenues of about Euro800m - representing about 35-40% of the company's total sales - and about 4600 employees.

Following the sale of its cellulose-based activities, Acordis will continue to focus on its remaining industrial business units, which mainly comprise industrial fibres and the Colbond industrial non-wovens and geo textiles, the spokesman said. No financial details of this sale were disclosed.

The new company will be 54% owned by private equity funds advised by CVC. About 18% will be held by various Austrian co-investors, 18% will be held by Acordis and 10% will be held by the management of the new company.

Bank Austria revealed today that its Lenzing stake totals 80%, including its 50.1% industrial stake. A spokesman said the bank holds the remainder through its equity trading portfolio.

(The EC later blocked this acquisition on the grounds that it would give Acordis a near-monopoly in EU viscose and lyocell fibres.  Later still it allowed Lenzing to acquire Tencel, apparently ignoring the same monopoly.  More to come...)

Sunday, February 3, 2013

Pat White: 25 years of Tencel Development (2004)

Here's a summary of a rare public paper from Pat White, then Technical Director of Tencel Ltd and writing at the time of the Lenzing takeover.  It was given as the Keynote Speech at the 2004 TITK Alternative Cellulose conference in Rudolstadt Germany. 

Pat White leaving TITK with a present from TITK
Pat White, Tencel Ltd's Technical Director reviewed 25 years spent taking the lyocell process from curiosity to reality. Charged in 1979 with developing a low cost, environmentally-friendly route to rayon which would allow the venerable viscose process to retire gracefully, he rapidly identified NMMO as the most promising solvent. Fibres made from NMMO were all but indistinguishable from the premium Japanese polynosic rayon in character, so the key developments were to devise a highly efficient recovery system for the expensive solvent, and to optimise the process to deliver acceptable throughputs despite the solvent's tendency to degrade cellulose explosively if pushed too hard. The success of the engineering development coupled with a strong fashion-led Japanese demand for fibre led to rapid expansion and Lenzing's entry into the technology. The result: excess capacity because the projected long-term increase in fashion-sales proved unsustainable. Fibrillation and its control has dominated process and market development from the start: