Sunday, March 17, 2013

UK OFT on the Lenzing Takeover of Tencel - Part 3 (2004)

(Click here for Part 1)
The one third party objection mentioned appears to have been a user of either short-cut Tencel or A100, neither of which were supplied from Austria at that time, and both needing capital investment.  The "unpredictability of demand" comment from Lenzing suggests it might have been short-cut.

19. Numerous third parties were contacted by the OFT but not many responded. The majority of those that did respond were not concerned about the merger due to the availability of substitute fibres for lyocell. Although some third parties did view the properties of lyocell as unique, a majority did not expect this transaction to affect competition adversely within the UK. However, one UK customer did assert that the merger would lead to a reduction in its choice of lyocell supplier. But the OFT’s investigation suggests that this customer has a particular requirement that can not be met by Lenzing. This is because while the lyocell supplied by Tencel and Lenzing is chemically the same, it is cut and produced in different ways. Furthermore Lenzing submitted evidence to the OFT suggesting that the capital investment required to enable it to supply this customer would be considerable and could not be justified given the unpredictability of this demand.

20. The merged entity would be the major supplier of lyocell and lyocell processing and production technology worldwide. However, the question at hand is whether the merger has resulted, or may be expected to result, in a lessening of competition that is substantial within any market or markets in the UK. 

Lenzing has not been a substantial supplier to, or competitor in, the UK; nor are there grounds to believe that it would become one. In addition the third party investigation carried out by the OFT revealed that for the majority of customers within the UK a range of fibres (depending on the application) appear to be available and lyocell is only used as long as it is competitively priced.

21. Consequently, the OFT does not believe that it is or may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

22. This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.

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