Antitrust Law Daily Liqui-Box wins U.S. approval to acquire DS Smith plc’s plastics division
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Wednesday, February 19, 2020

Liqui-Box wins U.S. approval to acquire DS Smith plc’s plastics division

By Peter Reap, J.D., LL.M.

A proposed settlement with the Justice Department would require the liquid packaging company to divest selected DS Smith/Rapak bag-in-box business.

The Justice Department announced today that it that it is requiring Olympus Growth Fund VI L.P., its portfolio company Liqui-Box Inc., and DS Smith plc to divest all of DS Smith’s dairy, post-mix, smoothie, and wine bag-in-box (BiB) product lines in the United States in order for Liqui-Box to proceed with its proposed acquisition of the plastics division of DS Smith. Without the divestiture, the proposed acquisition would eliminate competition between two of the primary suppliers of dairy, post-mix, smoothie, and wine BiBs in the United States, the government alleged in a suit filed in the federal district court in Washington D.C. Simultaneously, the Justice Department filed a proposed settlement that, if approved, would resolve the allegations and allow the combination to proceed (U.S. v. Olympus Growth Fund VI L.P., Case 1:20-cv-00464).

According to the Antitrust Division’s complaint, BiBs are engineered plastic bags used to store and dispense liquids such as milk, post-mix (e.g., soda syrups and other beverage concentrates), smoothies, and wine. In the United States, Liqui-Box and DS Smith are two of only three significant suppliers of BiBs for nearly all end uses, including dairy, post-mix, and smoothies. They are also two of only four significant suppliers of BiBs for wine in the United States.

Liqui-Box is a Delaware corporation with headquarters in Richmond, Virginia. In 2018, Liqui-Box had total sales of $177 million, including approximately $123 million in sales in the United States. Liqui-Box is held by private equity firm Olympus Growth.

DS Smith is a United Kingdom public limited company with headquarters in London, England. DS Smith’s Plastics Division is headquartered in Romeoville, Illinois, and it had total 2018 sales of $479 million, including approximately $137 million in sales in the United States. Pursuant to a Stock Purchase Agreement announced in March 2019, Liqui-Box agreed to acquire DS Smith Plastics for approximately $500 million.

The government alleged that the proposed acquisition would eliminate the substantial head-to-head competition between Liqui-Box and DS Smith and the benefits that customers realized from that competition in the form of lower prices and better quality and service. By eliminating DS Smith as a competitor, the proposed acquisition would substantially increase the likelihood that Liqui-Box would increase prices, reduce quality and service, and diminish investment in research and development below what it would have been absent the acquisition, the Justice Department charged. Further, entry into the markets for the relevant BiB products is costly and time consuming and would not be timely, likely, or sufficient to prevent the harm to competition caused by Liqui-Box’s proposed acquisition.

Settlement terms. Under the terms of the Proposed Final Judgment, Liqui-Box must divest all of DS Smith’s BiB product lines that overlap with product lines offered by Liqui-Box in the United States, including those for dairy, post-mix, smoothie, and wine BiBs, as well as production facilities in Indianapolis, Indiana, and Union City, California, the Rapak brand, and other production equipment and assets, to TriMas Corporation (TriMas), or an alternate acquirer approved by the United States. TriMas, a Michigan-based manufacturer operating in the consumer products, aerospace, and industrial end markets, already sells a variety of packaging products for the health, beauty and home care, beverage, and industrial markets. An Asset Preservation Stipulation and Order ensures, prior to such divestiture, that the divestiture assets will remain economically viable, competitive, and saleable, and that the defendants will preserve and maintain those assets.

The case is No. 1:20-cv-00464.

Attorneys: Christine A. Hill and Makan Delrahim, U.S. Department of Justice, for the United States. Katherine A. Rocco (Kirkland & Ellis LLP) for Olympus Growth Fund VI, L.P. and Liqui-Box, Inc. Joseph J. Matelis (Sullivan & Cromwell LLP) for DS Smith PLC.

Companies: Olympus Growth Fund VI, L.P.; Liqui-Box, Inc.; DS Smith PLC; TriMas Corp.

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