Ardagh vows to “vigorously defend” transaction as Saint-Gobain deal challenged

By Joseph James Whitworth

- Last updated on GMT

Ardagh $1.7bn takeover of Saint-Gobain challenged by FTC
Ardagh $1.7bn takeover of Saint-Gobain challenged by FTC

Related tags Bottle Federal trade commission

Ardagh’s has said it will “vigorously defend” its $1.7bn acquisition of Verailla North America (VNA) after it was challenged by the US Federal Trade Commission (FTC) due to competition concerns.

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

The commission issued an administrative complaint​ alleging that the acquisition would violate US antitrust law.

Ardagh said it was disappointed in the action that the commission has taken.

“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.”

Market competition

The Federal Trade Commission issued an administrative complaint alleging that the acquisition of Verallia North America is anticompetitive as it relates to the sale of glass containers for beer and spirits.

The commission added that it would be filing a petition in the federal district court seeking a preliminary injunction to prohibit the closing of the transaction pending a decision on the merits of its administrative complaint.

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

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.”

Ardagh in the US

Ardagh, a European glass and metal company, entered the US glass container market in 2012 by acquiring Anchor Glass Container Corporation, the longstanding third-largest US glass manufacturer, and Leone Industries, a small, single-plant glassmaker.

The proposed acquisition would be Ardagh’s third US glass acquisition in little more than a year.

The complaint alleges that brewers and distillers do not view other packaging materials as interchangeable for glass bottles because of consumer preferences and brand identity.

“Glass promotes a premium or distinctive brand image; enables brewers and distillers to convey a premium image by associating the quality appearance of the glass with their product identity; protects beer and spirits by guarding against oxygen invasion for a longer shelf life; maintains the true taste of the beer or spirits; is chemically inert and does not leach chemicals into the beer and spirits; and is 100% recyclable,” ​the complaint detailed.

According to the complaint, each year, Americans use more than 18 billion glass beer and spirits containers.

Three manufacturers, including Ardagh and Saint-Gobain, produce the majority of these glass containers. Together, they dominate the $5bn US glass container industry.

The evidentiary hearing will begin before an administrative law judge at the FTC on 2 December.

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