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DS Smith PLC's proposed sale of its rigid and flexible packaging business raises competition concerns flag

Liqui-Box and DS Smith are two of the four main companies in the UK, offering a specialist type of packaging called "Bag-in Box" to food, wine, dairy and drink suppliers.

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The Competition and Markets Authority (CMA) has raised concerns about DS Smith PLC’s (LON:SMDS) proposed sale of its rigid and flexible packaging business.

The competition watchdog said the takeover of the business by Liqui-Box could create insufficient competition in the supply of “bag-in-box” packaging products, leading to their customers potentially having less choice and paying higher prices, especially as there are very few large suppliers in the UK.

The CMA is also concerned that the reduction in competition could lead to lower quality products and/or poorer service.

The deal need not necessarily be dead in the water, however; a common response to these sorts of objections is for the selling company to split up the business it is selling and either retain one part of it or sell the two parts to different buyers.

The CMA said if the merging businesses are not able to address its concerns, the deal will be referred for an in-depth Phase 2 investigation to be carried out by a group of independent CMA panel members.

Quick facts: DS Smith plc

Price: 370 GBX

LSE:SMDS
Market: LSE
Market Cap: £5.08 billion
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