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.”