Tuesday, March 5, 2013

UK OFT on the Lenzing Takeover of Tencel (2004)

The UK's Office of Fair Trading reviewed the Lenzing take-over of Tencel in 2004 and the document contains some interesting information.
  • Lenzing Lyocell was never profitable: 13,500 tonnes sold from 40,000 tonne capacity in 2003.
  • 8 tonnes sold in the UK for less than £10,000 in 2003 (~£1.2/kg)
  • Grimsby Tencel selling at ~ £2/kg)
Some extracts from the document follow:

In 2001, the EC Commission (the Commission) prohibited the proposed acquisition by CVC (who owned Acordis, of which Tencel was then a part) of Lenzing AG (Comp/M.2187). The Commission concluded that the relevant product markets at that time were: commodity viscose staple fibres (VSF); spun-dyed viscose staple fibres; viscose staple fibres for tampons; lyocell; and lyocell production and processing technology. It held that the transaction would have strengthened a dominant position in relation to the supply of VSF for tampons and would have created a dominant position in all the remaining relevant product markets. It concluded, inter alia, that the merger would create the world’s leading supplier of lyocell, with Lenzing accounting for about 25per cent and Tencel for 75 per cent of total worldwide sales at that time.

Lenzing is active in the manufacture and supply of, among other things, lyocell fibres, which are made from wood pulp and characterized by high wearing comfort and moisture management. Its production capacity accounts for about 40,000 tonnes of lyocell from its plant located in Austria (actual production in 2003 was about 13,500 tonnes). Lenzing claims that its lyocell business has never been profitable. Lenzing imported just 8 tons of lyocell into the UK in 2003 which amounted to less than £10,000 sales value.

Tencel was part of the international financial group CVC. Its production capacity for lyocell amounts to [70,000-90,000] tonnes and it has production sites in Alabama, USA (actual production for 2003 of [15,000-25,000] tonnes), and Grimsby, UK, (actual production [20,000-30,000] tonnes in 2003). Its total UK turnover is less than £ 70 million.

On 4 May 2004, Lenzing took over the entire Tencel group of companies including Tencel. The transaction was notified to the OFT on 9 July 2004 and the administrative timetable expires 6 September 2004. The extended statutory deadline is 1 October 2004. The merger was found to qualify for review in Austria and has been notified to the competent authorities.

[...] indicates actual figures replaced by ranges by OFT.

Source: UK OFT Mergers

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