03 July 2013 00:03 [Source: ICIS news]
HOUSTON (ICIS)--The proposed consolidation of North America’s second- and third-largest glass container makers could give the dominant players "extraordinary pricing power" with suppliers, two raw materials producers said on Tuesday.
Luxembourg-based Ardagh Group had announced plans to acquire Verallia North America, a subsidiary of French conglomerate Saint-Gobain for $1.7bn (€1.3bn).
“They would definitely have more leverage with suppliers for lower prices,” said a producer. “Or, at least they would try to use their size to get lower prices.”
Another producer said that the pricing negotiating power of the combined companies for products, such as soda ash and other ingredients for glass manufacture, would be limited by the ability of brewers and distillers to import bottles from China, South Africa and other places.
On Monday, the US Federal Trade Commission (FTC) challenged the proposed acquisition, saying that the deal would lead to less competition and product innovation but prompt higher prices.
“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.”
The FTC said that the proposed acquisition would give the combined companies, along with competitor Owens-Illinois, control of over 75% of the $5bn US glass container market.
The antitrust agency has scheduled a hearing for 2 December 2013 and will seek a temporary injunction to halt the acquisition until a judge rules on the case.
In a statement posted on its website, Ardagh said that it was “disappointed” in the ruling and believed that the acquisition would be good for consumers.
“Ardagh intends to vigorously defend the transaction in litigation, whilst at the same time working with the FTC to seek to resolve its concerns,” the company said.
Ardagh entered the U.S. market in 2012 with the acquisition of Anchor Glass Container, which was the third-largest U.S. producer of glass containers. Ardagh has since acquired the smaller Leone Industries, which operates a single glass plant.
Major suppliers of soda ash to the glass manufacturing industry include Solvay Soda Ash, FMC Wyoming, OCI Chemical and Tata Chemicals North America.
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