The European Commission has conditionally approved the proposed $9 billion merger between global packaging giants Amcor Limited (ASX: AMC) and Bemis Company, Inc (NYSE: BMS). In order to appease the EC's competition concerns, Amcor will be required to divest Bemis' entire European medical packaging business.
The EC had raised concerns about the combination of the companies' medical packaging operations, given that Amcor and Bemis are the biggest medical packaging players in the European Economic Area and have been close competitors. The combined entity would have been three times larger than the next largest medical packaging competitor.
To resolve these concerns, the merged entity will be required to divest Bemis' three healthcare packaging plants in Europe. These plants generate combined annual revenue of approximately USD $170 million. Amcor pointed out that its own "substantially larger" European healthcare packaging business will be retained, allowing continued access to "attractive, high-value end markets".
The announcement represents progress towards Amcor's acquisition of its smaller rival through an all-stock deal. Amcor will issue 5.1 of its shares as consideration for each Bemis share, which implied a 25% takeover premium at the time of the deal announcement in August.
Regulatory approval is still required in the United States and Brazil. Amcor says that it is in "advanced discussions" with the relevant regulators, and signaled that further potential divestments may be required for antitrust approval.
"Inclusive of remedies required by the European Commission, collective potential remedies would represent an immaterial proportion of the total sales for the combined company and would not impact the USD $180 million of net cost synergies expected to be delivered by the end of the third year following completion," the company said in its announcement.
The Amcor share price is 0.5% higher today to $14.62, and 10.2% higher YTD.
