Lenzing modify application for Tencel takeover (2004)

Points to note:  

• Heiligenkreuz employed 180 people
• Lenzing Lyocell R&D employed another 130 people
• Any remaining Tencel R&D would be moving to Austria

LONDON (CNI)--Austrian fibres group Lenzing said Friday it will file a modified application for its acquisition of the Tencel cellulose fibres company in the next few days.

The Austrian Supreme Court on 14 February confirmed a 28 October decision by the anti-trust authorities restraining Lenzing from the acquisition.

However, an agreement was made with the anti-trust authorities prior to the ruling on conditions and limitations to be included in a revised application.

A Lenzing spokeswoman told CNI the company had not agreed that the acquisition would lead to a monopoly in its markets. Austrian law, however, contains a provision to safeguard the country’s economy against concentration of manufacturing segments.

She added that the company in its new application would have to promise to safeguard for six years the 180 jobs at its 40 000 tonne/year fibre production plant at Heiligenkreuz, Austria.

Lenzing also had to guarantee that its Lyocell research and development (R&D) business, which employs 130 people, will stay in Austria.

Since agreement has been reached on the terms, the company expects a swift approval of the merger. The spokeswoman said this would probably mean a final decision would be made in four to six weeks. 

18 February 2005 15:19 [Source: ICIS news]

Austrian court moves to block Lenzing's Tencel takeover (2004)

LONDON (CNI)--Austrian fibres group Lenzing said on Friday it is to appeal against a decision by the Higher Regional Court in Vienna to block its acquisition of the Tencel cellulose fibres company.

The court, acting in its capacity as Austria's antitrust authority, has ruled that the deal breaches competition rules.

Lenzing, which formally took over Tencel in May this year, said it would appeal against the decision to Austria's Supreme Court.

In a statement sent today to CNI, Lenzing chairman Thomas Fahnemann said: "We are quite surprised about the court's decision. This applies all the more, as other antitrust authorities such as the UK's Office of Fair Trading (OFT), the German Bundeskarteliamt and the US antirtust authority did not object to the acquisition."

A spokeswoman for Lenzing told CNI that a more detailed response to the Higher Regional Court ruling would be made next week following receipt of the detailed written decision.

The Tencel acquisition has further strengthened Lenzing's position in the high value cellulose fibres market and combines former rivals that first developed the revolutionary wood fibre discovered in the late 1980s.

Tencel has a total nominal capacity for Lyocell cellulose-based fibre of 80 000 tonne/year at plants in the US and the UK. Its sales in 2003 were Euro100m ($120m). Lenzing has a production capacity for Lyocell of about 40 000 tonne. Its 2003 Lyocell sales have not been disclosed.

Fahnemann said in announcing the acquisition that it marked a milestone for the Lenzing group. “We are tripling our Lyocell capacity and thereby reaching the critical size that is necessary for a sustainable and profitable Lyocell operation.”

29 October 2004 15:47 [Source: ICIS news]

Lenzing to keep all 'Lyocell' capacity to meet demand (2004)

LONDON (CNI)--Austrian fibres producer Lenzing confirmed on Thursday that it plans to keep all Lyocell fibre production plants running to meet current demand.

The assurance was given after Lenzing's announcement yesterday that it had bought rival producer Tencel for an undisclosed sum from private equity group CVC making it the world’s pre-eminent producer of the fibre.

The deal combines the two major producers of the specialty wood pulp based fibre currently finding use in non-woven applications and in textiles.

Lenzing management board chairman, Thomas Fahnemann, told CNI in an interview that current demand for Lyocell is strong in Asia. Fahnemann’s company developed its Lyocell fibre at the same time as Tencel(then the brand name of the product created by former UK fibres producer Courtaulds).

Lenzing is producing between 25 000 tonne a year and 27 000 tonne a year of Lyocell fibre at its plant at Heiligenkreuz in Austria, he said, as it starts up a second 20 000 tonne a year production line. About 70% of output from Heiligenkreuz is being sold into Asia textile markets, he added.

Lenzing produces Lyocell for textiles and other fibre segments while the Tencel business – which comprises two plants (in Mobile, Alabama in the US and at Grimsby in the UK) with a combined capacity of 80 000 tonne/year and associated technology – makes fibre largely for non-wovens.

There is not a lot of overlap between the two businesses, Fahnemann said, and he is clearly keen to see further technological development from the combined operations.

Lyocell is the first new fibre developed in more than 50 years. Created in the late 1980s, it is described as being still in the early stages of its life cycle and further progress is expected, particularly on the cost of production. The explosion at the Heiligenkreuz plant in November last year (2003) demonstrated that there is still more to be learned about that process.

Fahnemann believes Lenzing has now achieved the critical mass to be competitive in Lyocell and the technical knowhow to further develop the product. Particularly, the company will be addressing cost of production issues, he said.

By: Nigel Davis 06 May 2004 14:56 [Source: ICIS news]

Lenzing acquire Tencel (2004)

Points to Note:

• This take-over will be approved by the EC because Tencel's sales in 2003 were worth less than  €100 million ($119 million)
• "This is by far the best solution..." (It would be interesting to know what Lenzing paid CVC.)
• "The fastest growing part of the [Tencel] market is wipes".
• New capacity expected soon in Asia.

Lenzing AG has agreed to acquire, for an undisclosed sum, Tencel, its main competitor in the growing market for lyocell cellulose fiber, in which both companies are facing the prospect of strong competition from new Asian producers.

Although the deal gives Lenzing a monopoly in lyocell capacity in both Europe and North America, the takeover is unlikely to be barred by competition authorities. Tencel’s sales of around €100 million ($119 million) in 2003 are below the threshold above which its acquisition would have to be approved by the European Commission (EC).

Three years ago, the EC blocked a move by CVC, the international financial group, to take over Lenzing and merge it with its fibers subsidiary, Acordis, of which Tencel was then a part.

“We’ve examined the competition implications very carefully,” says a Lenzing spokesperson. “The deal is totally different from the one which was proposed three years ago.”

“Not only is Tencel not big enough to come under antitrust rules, but it formed only a small part of what was Acordis, whose major business like Lenzing’s was viscose fibers,” she adds.

UK-based Tencel, which has a total of around 60,000 tons per year of operating capacity in Mobile, Ala., and in Grimsby, England, was last year spun off from Acordis in order to make it easier to divest.

“Our owners have been trying to dispose of Tencel for the last three years,” says Mike Proctor, chief executive of Tencel whose fiber is marketed under the Tencel brand name. “This is by far the best solution for all stakeholders.

Geoffrey Owen's Tencel lyocell history extracts (part 5)

Geoffrey Owen of the Department of Management, London School of Economics presented a paper at SPRU in October this year entitled "Innovation in the man-made fibres industry: corporate strategy and national institutions." It is based on unpublished material made available to the author by Akzo Nobel, Lenzing and Courtaulds (amongst others) and is available in full here on the web as a PDF file. It contains excellent sections on Tencel lyocell development history, the fifth extract of which is reproduced below.  This deals with the early history of Courtaulds putting the Tencel development in context.  The final extract will do the same for Lenzing and their lyocell.


Founded in 1816, Courtaulds became one of the country’s leading silk weavers, but by the end of the century its main product – mourning crepe – was in decline and new sources of growth were needed. In 1904 it acquired the patents for the viscose process. A factory was built in Coventry, and over the next few years Courtaulds established itself as the world’s leading rayon producer. It was the first European company to start rayon production in the US; its American subsidiary accounted for a large share of its profits in the inter-war years.  

Following the invention of nylon, Courtaulds was eager to get into synthetics, and in 1940 it formed a joint nylon venture with ICI. (ICI had a patent-sharing agreement with DuPont and thus had access to the American company’s nylon technology.) However, it was kept out of polyester by ICI, which was the principal patent holder, and although Courtaulds launched its own acrylic fibre, Courtelle, in 1959, it was still heavily dependent on slow-growing cellulosic fibres. Partly for that reason, it diversified into other industries, principally paints and packaging. It also had a small textile business, derived from its earlier vocation as a silk weaver. 

The diversification drive was stepped up in the mid-1960s, following an abortive attempt by ICI to take over Courtaulds. The new management which took control of the company after the bid adopted a policy of forward integration, investing on a large scale in textiles and clothing in order to secure captive outlets for its fibres. The company also made further acquisitions outside fibres, principally in paints. A new business that was started in the 1960s, based on licensed technology, was carbon fibre, which is described more fully in the next section; carbon fibre later formed part of a new division, Courtaulds Advanced Materials.

The investment in textiles and clothing proved to be a serious mistake and in the mid-1970s Courtaulds was in financial trouble. Many of its textile mills and clothing factories could not compete with imports from low-wage countries; cutbacks in capacity were unavoidable. In fibres Courtaulds had been successful with Courtelle but still had a big commitment to cellulosics, the outlook for which looked unpromising. Of its various diversifications only paints had done well. 

What followed in the 1980s was an attempt to reposition the company, aimed at businesses in which Courtaulds had, or could reasonably hope to create, a competitive advantage. Textiles and clothing were demerged into a separate company, Courtaulds Textiles; several downstream chemical businesses, principally in coatings and advanced materials, were acquired; and a
woodpulp mill in South Africa which had been the principal supplier to Courtaulds’ rayon factories, was sold. Fibres might have been divested during this period, but Courtelle was profitable, and the company had developed a new cellulosic fibre, based on the solvent spinning process (see below),
which appeared to have excellent prospects. In 1990 the company decided to manufacture the new fibre, branded as Tencel, in the US; the factory came on stream in 1992. 

By the mid-1990s Courtaulds had two main businesses, paints and fibres, of roughly equal size and at this point the company’s financial position began to deteriorate. Profits from the older fibres had collapsed, while sales of Tencel, after a promising start, were slowing down. Several of the acquired businesses were performing poorly. The best part of the company was the paints division, and it attracted the attention of international paints companies which were seeking to enlarge their stake in this industry. In 1998 Akzo Nobel, the Dutch company, launched a successful takeover bid for Courtaulds. Its only interest was in paints; the fibres business, including Tencel, was later sold to CVC, a private equity firm.