ACCC greenlights Amcor’s Detmold takeover

The Australian Competition and Consumer Commission is giving the go-ahead to Amcor’s $50m acquisition of Australian flexibles packager Detmold Flexibles.

Detmold makes paper, board and film packaging products for the FMCG and industrial markets, with plants in Melbourne and Adelaide and access to eight factories throughout the Asia Pacific region.

Detmold will become part of Amcor’s Asia Pacific flexibles division, joining 2012 acquisition Aperio Group to manufacture and source a range of food and pharmaceutical packaging solutions for the region.

Rod Sims, chairman of the ACCC, says imports form the backbone of competition in the Australian packaging industry, and the deal is unlikely to weaken competition.

ACCC inquiries found that “FMCG manufacturers across a range of sectors can, and do, successfully manage their supply chain through importing value-added flexible packaging. Importers also have a growing presence in Australia and are able to offer warehousing, technical and sales staff to assist customers to manage an import supply chain.”

The review also says that customers of value-added flexible packaging often benchmark local suppliers’ pricing against the cost of imported products and use the threat of switching some or all of their value-added flexible packaging to imports to get cheaper prices from suppliers.

The watchdog approval may be greeted with a sigh of relief from the packaging giant as it clears the final obstacle of the deal – in February Amcor let potential US acquisition Constar International slip through its grasp at auction; despite setting itself up as the stalking horse bidder and publicising the potential merger.

With a customer base populated by the likes of Cadbury, Nestle, Mission Foods, CSR, Goodman Fielder and Fonterra, Detmold says its sales bring in around $55m a year.

Ken MacKenzie, CEO and managing director with Amcor, says, “The acquisition will further improve our customer value proposition in the Australian market by enhancing the ability to invest in both product and process innovation.

“Given the manufacturing overlap in the businesses there is considerable opportunity for operational synergies and returns are expected to be more than 20 per cent.”

Amcor’s flexible packaging segment, which makes up around 70 per cent of the business, saw earnings in constant currency terms up by 7.2 per cent for the first half of FY2014. Emerging markets in the sector – particularly China – saw more than 10 per cent growth.

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