Justice Department Requires Divestiture in Order for Liqui-Box to Proceed With Acquisition of Plastics Division of DS Smith

The Department of Justice announced today that it is requiring Olympus Growth Fund VI L.P. (Olympus Fund VI), its portfolio company Liqui-Box Inc. (Liqui-Box), and DS Smith plc (DS Smith) 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 Justice Department’s Antitrust Division filed a civil antitrust lawsuit today in the U.S. District Court for the District of Columbia to block the proposed merger. At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the competitive harm alleged in the lawsuit.

“The merger, as originally structured, would have eliminated competition for packaging products that dairies, soft-drink manufacturers, and other food producers rely on to preserve and safely transport liquids to stores, restaurants, and other food processors,” said Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division. “Today’s settlement will ensure that purchasers of BiBs continue to benefit from vigorous competition in the development, manufacture, and sale of these products.”

BiBs, flexible packaging consisting of an engineered plastic bag and attached plastic fitment, are used to store, protect, transport, and dispense various edible liquids. According to the Justice Department’s complaint, Liqui-Box and DS Smith, under its Rapak brand, are two of only three significant U.S. suppliers of dairy, post-mix (e.g., soda syrups and other beverage concentrates), and smoothie BiBs. The companies are also two of only four U.S. suppliers of BiBs that hold and dispense the wine in boxed wines. The Justice Department’s complaint alleges that competition between Liqui-Box and DS Smith for these BiBs has resulted in lower prices, higher quality, and better service, and has fostered innovation leading to the development of new BiB products. According to the complaint, the combination of Liqui-Box and DS Smith’s Plastics Division would eliminate this competition, and likely lead to increased prices, lower quality and service, and diminished investment in research and development.

Under the terms of the proposed settlement, 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.

Olympus Fund VI is a Delaware limited partnership with headquarters in Stamford, Connecticut. Olympus Fund VI is a fund of Olympus Partners, which, in 2018, had approximately $8.5 billion total capital under management between its different funds, with Olympus Fund VI comprising approximately $2.3 billion of that total.

Liqui-Box, a portfolio company of Olympus Fund VI, 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.

DS Smith is a United Kingdom public limited company with headquarters in London, England. DS Smith’s Plastics Division is headquartered in Romeoville, Illinois. In 2018, DS Smith’s Plastics Division had total sales of $479 million, including approximately $137 million in sales in the United States.

As required by the Tunney Act, the proposed settlement, along with a competitive impact statement, will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement during a 60-day comment period to Katrina Rouse, Chief, Defense, Industrials, and Aerospace Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street, N.W., Suite 8700, Washington, D.C. 20530. At the conclusion of the 60-day comment period, the U.S. District Court for the District of Columbia may enter the final judgment upon finding it is in the public interest.

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Author: February 19, 2020

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