http://today.reuters.com/investing/financeArticle.aspx?type=mergersNews&storyID=2006-04-03T102849Z_01_L03642050_RTRIDST_0_TIMBER-EU-MERGER-UPDATE-1.XML

EU says Omya failed to supply information
Mon Apr 3, 2006 6:28 AM ET

BRUSSELS, April 3 (Reuters) - Privately held Swiss firm Omya failed to give the European Commission accurate information on its proposed purchase of a rival, leading to further delays in a decision on clearing the deal, the Commission said on Monday.

That permitted the European Union's executive arm to delay its decision until June 28, which would give it time to take formal steps needed to require major changes or to block the deal involving carbonates, a critical input for paper.

Omya "initially failed to supply accurately the information which was requested at the beginning of January and we have only now had that information", a Commission official said.

Carbonates are mixed with paper pulp to change it from the rough, brown consistency used in products like paper towels to the smooth, white consistency used in printing and writing paper. Specialty forms are used for glossy paper such as magazine covers.

Omya had been close to winning approval to buy the carbonates unit of privately held U.S. firm Huber.

That would have given Omya 70 to 85 percent of the market for carbonates in the European Union and three other countries in the European Economic Area.

The situation would be even more extreme in Finland, approaching between 80 and 95 percent of the market in the country that is home to several major European manufacturers of paper, Stora Enso, UPM-Kymmene and M-real, according to the Finnish competition authority.

Paper prices have been languishing in the past few years and any increase in the cost of carbonates would put the industry under more pressure, analysts have said.

But under the Commission's rules it appeared that there would be no further delays, until the surprise decision reported by Reuters on Saturday for a further postponement.

The Commission had opened an in-depth review of the transaction in September, citing "a serious risk that effective competition will be impaired in these concentrated and complex markets."

But those familiar with the situation say that late last year or early this year an economist in the Commission came up with an unusual econometric model, most often used for situations involving trains or trucks.

This seemed to allay concerns that the deal would be anti-competitive, but it turned out the model was flawed.

By that time, it was too late to require changes in the deal -- or so it seemed.

According to some sources, national competition authorities had been unhappy about the way the Commission handled the deal.