Algroup merger faces EU ban

Switzerland's aluminium giant Algroup is expected to hear today that its plans for a three-way merger with Canada's Alcan and the French group Pechiney are to be blocked by the European Commission.

This content was published on March 13, 2000 - 21:14

Switzerland's aluminium giant Algroup is expected to hear today that its plans for a three-way merger with Canada's Alcan and the French group Pechiney are to be blocked by the European Commission. Such a decision by the EU's executive would reflect concerns over competition in the market.

The European Commission's competition services have the power to scrutinise large scale mergers and joint ventures which are expected to affect the Single Market. The planned consolidation in the aluminium sector falls firmly within this category.

The venture consists of two separate mergers, between Algroup and Alcan on the one hand, and between Alcan and Pechiney on the other. The result would be a "mega-merger" worth $21 billion, intended to counter the threat posed by a planned link-up between the United States firms Reynolds and Alcoa.

The Commission's role is to check whether such a venture would create or reinforce a dominant position in any of the market sectors in which the merged company would be active. If such a possibility exists, it can ask the companies to modify their plans, or refuse to authorise the merger.

In practice, permission is rarely refused - the Commission has only rejected 11 mergers in the nine years since it acquired the power to do so. Usually, companies withdraw their approval requests or modify their plans to address competition concerns.

Following a lengthy enquiry, the Commission has already indicated that the three way merger creates competition concerns, and is unlikely to be allowed. However, it may be prepared to permit the Algroup-Alcan part of the plan, while preventing Pechiney from linking up with the enlarged group.

Although the possibility remains that last-minute negotiations could alter the Commission's position, this is unlikely to happen. Its decision will have followed months of intense debate between officials and industrialists.

Swissinfo and agencies

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