A momentous European appeals court ruling has reopened the way for Tetra Laval International SA's plan to become the world leader in PET packaging machinery.
The Court of First Instance in Luxembourg, Europe's second-highest court, on Oct. 25 overturned the European Commission's decision to block Tetra Laval's $1.6 billion acquisition of French blow molding machine supplier Groupe Sidel.
Tetra Laval is the Pully, Switzerland-based parent of Tetra Pak, the world's largest manufacturer of paperboard cartons. The court dismissed the EC's argument that the merger would allow Tetra Laval to dominate Europe's liquid-packaging market.
Tetra Laval will have to resubmit its takeover plan for Le Havre, France-based Sidel to the EC for a decision in the new year. If the merger is approved, the deal will be concluded immediately, according to Tetra Laval.
``We are very pleased with this ruling and have always believed we had strong arguments for an approval. We hope for a fast process with the commission so that we can welcome Sidel as an additional member within the Tetra Laval group,'' Tetra Laval Chairman GÃ¶ran Grosskopf said in a statement after the decision.
The court's ruling has added significance since it is another nail in the coffin of Europe's current merger rules. Less than a week before the Tetra/Sidel ruling, the same court delivered another blow to European competition Commissioner Mario Monti. It overturned the EC's case against the merger of French companies Schneider Electric and Legrand, makers of electrical equipment including plugs and switches.
In a strikingly similar finding, the court judged the authority's ``economic analysis'' was tainted by ``errors and omissions.''
In the Tetra/Sidel ruling, the court stated: ``The economic analysis [of the deal's anti-competitive effects] is based on insufficient evidence and some errors of assessment.''
The court ruled that the commission had not proved that the merger would encourage Tetra Laval to take advantage of its powerful position to pressure its carton and packaging equipment customers wanting to switch to PET containers to use Sidel machines.
In a separate reference, the court annulled the EC's decision ordering Tetra Laval to dispose of Sidel stock. Tetra Laval holds a 94 percent stake in Sidel, which is publicly traded.
The commission must decide within two months whether to appeal the ruling to the European Court of Justice.
``We felt we had a very strong case and we are very pleased at this decision,'' said Jorgen Haglind, Tetra Laval's group vice president for communications. ``The next step is to reconfirm our interest in acquiring Sidel.''
He stressed that Tetra Laval still has to get the European Union's green light for the merger to be concluded.
In the past year Tetra has disposed of its own stretch blow molding machinery and PET preform businesses, although the EC did not order the company to take those measures.
Tetra Laval had 2001 sales of 8.5 billion euros ($8.3 billion) and has operations in 165 countries.