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Ahlstrom demerger delayed again due to competition concerns

By Joe Whitworth , 22-Feb-2013
Last updated the 22-Feb-2013 at 15:04 GMT

Ahlstrom’s proposed combination of its Label and Processing business with Munksjö has taken a blow after the European Commission raised competition concerns.

The document issued by the EU addresses the competitive effects of the proposed combination with respect to abrasive backings and pre-impregnated decor paper, said the firm.

Ahlstrom and Munksjö are working with the EU Commission in order to resolve the competition issues identified and the company stressed that no final decisions have been taken yet with regard to potential remedies.

“The potential effect of any remedies on the previously identified synergies will be communicated in due course,” said a company statement.

Expected Q2 completion

Ahlstrom said it now expects to complete the demerger of the Label and Processing business in Europe and other related measures forming the first phase of the planned transaction during the second financial quarter (Q2) of 2013 instead of the previously targeted Q1 2013.

The demerger of the business in Brazil is still expected to be completed in Q2 2013.

In-depth investigation

The Commission opened an in-depth investigation into the proposed combination in December 2012 citing competition concerns in the markets of pre-impregnated paper (PRIP) and abrasive paper backings, where the merged firm would have high market shares in the European Economic Area (EEA) and worldwide.

At the time, Joaquin Almunia, Commission vice president in charge of competition policy, said: “This proposed merger in the paper industry would remove a competitor from some markets which are already highly concentrated.

“The commission needs to make sure that effective competition is preserved and prevent harm to customers, particularly when the only few available sources of supply are at stake.”

On 27 November Ahlstrom's Extraordinary General Meeting approved the demerger concerning the business in Europe and the demerger in Brazil in accordance with the plans.

The new company called, Munksjö Oyj, was expected to generate synergies in the range of €25-€30m and in August 2012, Ahlstrom said the move would enable it to focus on value-added business areas including food packaging, building and energy.