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Ardagh to sell four plants to ease competition concerns in VNA takeover

By Joe Whitworth+

23-Sep-2013

Ardagh bids to quash regulatory concerns in Verallia North America deal
Ardagh bids to quash regulatory concerns in Verallia North America deal

Ardagh Group is to sell four glass container manufacturing plants as part of its $1.7bn acquisition of Verallia North America (VNA) which has been challenged by the US Federal Trade Commission (FTC) due to competition concerns.   

The glass packaging manufacturer said it firmly believes that its original acquisition of VNA is consistent with the antitrust laws but it is “very clear” that the amended transaction would “more than overcome” any possible regulatory concerns.

FTC filed an administrative complaint alleging that the acquisition would violate antitrust law earlier this year.

The proposed acquisition would combine the second-largest manufacturer of glass containers (Saint-Gobain) and the third-largest (Ardagh).

Standalone business

Ardagh said it is in negotiations with potential qualified buyers which are “well capitalized and own and operate other industrial businesses in the US.

It will sell the plants as a standalone business to one buyer.

The sites included in the standalone business are at Jacksonville, Florida and Warner Robins, Georgia facilities and those operated by VNA at Dolton, Illinois and Wilson, North Carolina.

Manufacturing capacity is equivalent to more than 100% of Ardagh’s existing beer business and more than 100% of VNA’s existing spirits business, said the firm.

Ardagh said the sale will create a strong, viable competitor for the manufacture and sale of glass containers in the US, particularly in the beer and spirits sectors.

Majority of marketplace

The FTC said in July that the merged firm and its only remaining significant competitor, O-I, would result in them controlling in excess of 75% of the market for glass containers for beer and spirits customers, resulting in higher prices for those customers.

“If Ardagh is allowed to acquire Saint-Gobain, it would eliminate beneficial competition that has led to lower prices for beer and spirits bottles,” said Norman Armstrong, Jr., deputy director of the FTC’s Bureau of Competition.

“This combination would lead to higher costs for brewers and distillers and less innovation in the glass container industry. Ultimately, this transaction will result in higher prices for consumers.”

Reacting to the move by the FTC in July, Ardagh said it would “vigorously defend” the planned deal and was “disappointed” in the action by the commission.

“We believe that the transaction will benefit glass container customers and is fully consistent with the antitrust laws.

“Ardagh intends to vigorously defend the transaction in litigation, whilst at the same time working with the FTC to seek to resolve its concerns.”

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