The Commission has cleared under the EU Merger Regulation the proposed acquisition of the Franco-Spanish company Altadis by Imperial Tobacco of the UK. The Commission's decision is conditional upon the divestment of a number of tobacco brands in certain national markets for roll-your-own tobacco, pipe tobacco and cigars where the Commission identified competition concerns. In light of this commitment, the Commission has concluded that the proposed transaction would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.

Imperial Tobacco Group plc is a manufacturer and distributor of a range of tobacco products including cigarettes, roll-your-own tobacco and cigarette paper, pipe tobacco and factory-made cigars in more than 130 countries worldwide. Its portfolio includes the cigarette brand West, the roll-your-own tobacco brands Drum, Golden Virginia and Van Nelle, and Rizla cigarette papers.

Altadis S.A. is active in the manufacture and sale of tobacco products worldwide, including cigarettes and cigars. Its origins are in the former French and Spanish tobacco monopolies, Seita and Tabacalera, and its main cigarette brands include Gauloises, Fortuna, Ducados and Gitanes. In cigars, Altadis produces both factory made and hand made cigars. Altadis has a large market share in hand made Cuban cigars following its acquisition in 2000 of a 50% interest in Corporación Habanos.

Altadis also provides logistic services for tobacco products and other goods in France, Italy, Morocco, Portugal and Spain. Together with the Italian company, Autogrill, Altadis jointly controls Aldeasa S.A. which operates retail outlets primarily in airports.

The Commission has concluded that the proposed transaction would not raise concerns in the cigarette market. The Commission's investigation confirmed that the horizontal overlaps between the activities of Altadis and Imperial in the cigarette market are generally limited and that the new entity would continue to face competition from several strong, effective competitors such as Philip Morris International, BAT and Japan Tobacco, which acquired Gallaher earlier this year.

The Commission's investigation did however find competition concerns in several markets for other tobacco products where the merged entity would have significant market shares.

These markets are for roll-your-own tobacco in France, Italy, Portugal and Spain; for pipe tobacco in Finland and France; and for cigars in Greece.

In each case, Imperial has offered to divest one or more brands to address the competition concerns identified by the Commission.

The divestment of these brands would mean that there is no increment in market share as a result of the proposed transaction.

The Commission also examined the potential effects of the merger on other tobacco manufacturers in the light of Altadis' very strong position in the wholesale distribution of tobacco products in France, Italy and Spain. The Commission concluded that the merged entity would have neither the ability nor the incentive to restrict its competitors' access to its distribution channels and that the merger would have no negative impact on the final consumer as in any case distribution costs account for a minor part of the final retail price of tobacco products.

The Commission also concluded that the proposed transaction would not restrict tobacco competitors' access to Aldeasa's retail outlets as this would not be in the interest of Autogrill, the other partner in the joint venture. [18 October 07]