Takeover battle for SIG reaches new high

By Ahmed ElAmin

- Last updated on GMT

Related tags: Sig, Private equity firms, Tetra pak, Tetra laval, Cvc capital partners

A billion dollar takeover battle to gain control of beverage
packaging giant SIG Holding is beingwaged between a New Zealand
investor and two European companies.

SIG is the world's second-biggest maker of drink cartons. The company put itself up for salethrough a public auction last year offering competitors a chance to put together a beverage cartonpackaging company to rival the dominance of Sweden-based Tetra Laval.

For processors SIG will become part of a larger supplier, giving the company more leverage oversetting prices for its packaging. On the positive side, a larger group might also be able to producemore innovative products, offer a wider array of options and provide a more international service tomultinationals.

Currently, Ferd Holding and CVC Capital Partners have jointly put in the highest bid for thecompany so far. Their 400 Swiss francs per share offer, made over the Christmas holidays, values SIGat €1.6bn.

Ferd is the parent of Norway-based Elopak. London-based CVC Capital Partners is an investmentholding company. The two companies already own 10.6 per cent of SIG.

The group raised their offer in response to a previous offer by New Zealand billionaire GraemeHart. His offer valued the company at about €1.5bn. Hart already controls Rank Group, whichtogether with SIG, would become the world's second largest producer of beverage packaging afterTetra Laval.

SIG had sales of €1.2bn last year from products such as cartons for long life drinks andpolyethylene terephthalate (PET) bottles. The purchase would add to Rank's considerable holdings inthe global packaging industry, a portfolio that the investment company has been building for thepast year.

Earlier this year Hart bought Carter Holt Harvey, the New Zealand forestry and packaging groupfor NZ$3.3bn (€1.7bn).

Hart has since sold the company's forestry unit to US-based Hancock Group for about NZ$1.5bn(€792m). Earlier this CHH's packaging operations. This month he also agreed to purchaseInternational Paper's drinks packaging business for NZ$725m (€382.8m).

International Paper's drinks packaging business sells products such as liquid paperboardpackaging for dairy products and juice. The unit has plants in North America and Asia.

The bidding war for SIG started after CVC and Ferd offered 350 francs per share for SIG on thecondition the company opened its accounts to due diligence scrutiny. After the company refused thetwo opened the bidding at 325 francs per share on November 6. Ferd wants to combine SIG with Elopak.

The European Commission on 22 December said it has opened an investigation into whether the CVC and Ferdoffer would diminish competition in the market.

Both Elopak and SIG are suppliers of carton filling machines and carton material for non-carbonated liquid food products packaging.Under EU rules the Commission has 90 working days, until 15 May, to take a final decision on whether the concentration would significantly impedecompetition.

The carton packaging market in the EU is characterised by a rather exceptional concentrated market structure withTetra Pak dominating the market, while SIG and Elopak compete fir the rest of the business, theCommission noted.

Therefore the proposed transaction would combine the second and the third largest suppliers, while Tetra Pak would remain the largest competitor.

The Commission also said that the structure after such a merger would mirror that of the upstream market for liquid packaging board,the main raw material used to produce carton packaging material, which has existed since the acquisition of AD Cartonboard by Korsnäs in Maylast year.

"The relevant product and geographic markets have been investigated in a number of previous merger and antitrust decisions involving the market leader TetraPak,"​ the Commission stated. "The parties' activities overlap in the market for high-acid aseptic liquid products (juices) where Elopak is a recent entrant. In its detailed investigation, the Commission will scrutinise how the removal of Elopak as competitor would affect the competitive dynamics in these markets."

Tetra Pak, owned by Sweden's Rausing family, has an 80 per cent share of the carton packagingmarket, according to a Bloomberg report. SIG has a 15 per cent and Elopak about 7.5 per cent of themarket, with International Paper ranking fourth, Bloomberg stated.

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