COMMISSION DECISION of 18/06/1996 declaring a concentration to be compatible with the common market (Case No IV/M.755 - Creditanstalt / Koramic / Wienerberger) according to Council Regulation (EEC) No 4064/89

(Only the English text is authentic)

The paper version of the decision is available through the sales offices of the Office of Official Publications of the European Communities.

PUBLIC VERSION

MERGER PROCEDURE

ARTICLE 6(1)(b) DECISION

To the notifying parties

Dear Sirs,

Subject :<ind> Case No IV/M. 755 Creditanstalt/Koramic/Wienerberger

<ind> Notification of 10 May 1996 pursuant to Article 4 of Council Regulation No 4064/89

1.<ind> On 10.05.1996, the Commission received a notification of aproposed concentration pursuant to Article 4 of Council Regulation (EEC) No. 4064/89 [OJ No L 395 of 30.12.1989; Corrigendum: OJ No L 257 of 21.09.1990, p. 13.] by which the undertakings CreditanstaltBankverein and Koramic Building Products N.V. acquire within the meaning of Article 3(1)(b) of the Council Regulation joint control of Wienerberger Baustoffindustrie AG and Terca Bricks N.V.

2.<ind> After examination of the notification, the Commission has decided not to oppose the notified operation and to declare it compatible with the common market and with the functioning of the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of Council Regulation No 4064/89.

I.<ind> THE PARTIES

3.<ind> CreditanstaltBankverein is a bank, founded in 1855, and has its headquarters in Vienna. Its purpose is to carry on any type of banking activity.

4.<ind> Koramic Building Products N.V is incorporated under Belgian law as a "Naamloze Vennootschap". The purpose of this corporation is on the one hand to acquire and to hold any form of participation in existing or new companies, and on the other hand the production and supply of all building materials, more especially ceramic building materials.

<ind> Koramic Building Products N.V is currently a holding company which controls the entire brick business of the Koramic Group.

5.<ind> Wienerberger Baustoffindustrie is the parent of the Austrian Wienerberger group, which supplies building materials.

II.<ind> THE CONCENTRATION

6.<ind> The proposed concentration will be achieved in two steps :

<ind>

<ind> In the first step, Koramic and Wienerberger will concentrate their brick activities in Wienerberger Baustoffindustrie AG by contributing Koramic's subsidiary Terca Bricks N.V. into Wienerberger. In exchange for this contribution in kind, Koramic will receive new shares of Wienerberger. At the same time, Koramic will acquire additional shares of Wienerberger from CreditanstaltBankverein.

<ind> In the second step, CreditanstaltBankverein and Koramic will form a 50/50 joint venture company, which will bear the name Wienerberger Holding Gesellschaft mbH. Each party will transfer to Wienerberger Holding Gesellschaft mbH 25% of the shares in Wienerberger Baustoffindustrie AG together with one additional share. This latter company will own 100% of the shares of Terca Bricks N.V. CreditanstaltBankverein and Koramic will therefore through Wienerberger Holding Gesellschaft mbH exercise joint control over Wienerberger Baustoffindustrie AG and Terca Bricks NV.

III.<ind> COMMUNITY DIMENSION

7.<ind> The accumulated worldwide turnover of the undertakings concerned represents more than 5000 MECU and the Communitywide turnover of Creditatanstalt and Weinerberger more than 250 MECU. The parties do not both achieve more than twothirds of their aggregate Communitywide turnover within one and the same Member State. Therefore the case has a Community dimension.

IV.<ind> CONCENTRATION

8.<ind> The new entity will constitute a concentration within the meaning of Article 3 (2) of the Council Regulation N 4064/89.

<ind> Joint Control

9.<ind> Wienerberger Holding Gesellschaft mbH will be owned in equal shares by its parents, CreditanstaltBankverein and Koramic Building Products N.V. The parents will form a parties meeting which will decide on the control of Wienerberger Baustoffindustrie AG. The board of directors of Wienerberger Holding Gesellschaft mbH will exercise the voting rights in the general assembly of Wienerberger Baustoffindustrie AG in accordance with the directions made by the parties meeting. The parents will ensure that the members of the supervisory board of Wienerberger Baustoffindustrie AG exercise their rights in accordance with the instructions of the party appointing them.

<ind> Absence of coordination

10.<ind> Because both Koramic and Creditanstalt, through Wienerberger, put all their brick activities in the joint venture and therefore withdraw from these product markets, there can be no coordination between the parents as a result of the creation of the joint venture.

V.<ind> APPRAISAL

A.<ind> Relevant product market

11.<ind> The proposed operation concerns clay bricks, products used for the building of walls. Bricks can be divided into those remaining visible, with an aesthetic value (clay facing bricks), and those, invisible when the building is complete, which are made by treating them with a finishing coat (clay hollow bricks). In order to define the relevant product market two issues require to be examined, first the substitutability between clay facing bricks and clay hollow bricks, secondly, wether or not clay facing bricks and clay hollow bricks are substitutable, the substitutability of clay facing bricks and clay hollow bricks with other types of building materials.

1)<ind> Absence of substitutability between clay facing bricks and clay hollow bricks.

12.<ind> The competitors and the consumers questioned by the Commission all agree to say that the relevant product market, at the first step, is divided into two large groups of products; on the one hand the facing wall systems, and on the other hand innerwall systems.

i)<ind> Facing wall systems

<ind> Facing wall systems fulfil a visible exterior function. Besides their construction function, they fulfil an aesthetic role and have to be resistant against all possible weather influences.

ii)<ind> Construction innerwall systems

<ind> These walling materials consists of all products used for the manufacturing of rising walls and generally have an innerwall or a partition wall function. These products become most of the time invisible because they are plastered or painted for aesthetic reasons.

13.<ind> This division into two relevant product markets has already been applied in former Commission decisions (Steetley/Tarmac IV/M 180, 12/02/92 under the Council Regulation articles 9 and 6(1)(b)).

14.<ind> Each of these two large groups of products includes a large range of products. The notifying parties argue that these latter are widely interchangeable.

<ind> One product market would consist of all facing wall systems, in which they include clay facing bricks, concrete facing blocks, silica and limestone blocks, natural stone, hangup systems, sandwich exterior wallsystems, monolytical exterior wallsystems and other products such as glass, aluminium and steel.

<ind> The other would be construction innerwall systems, from clay hollow bricks to concrete blocks, hollow concrete blocks, pumice concrete stone, limestone blocks and other materials.

iii)<ind> Clay facing bricks :

15.<ind> These materials essentially comprise building bricks that are suitable for use in fairfaced brickwork and other facings. Such bricks must be resistant to frost and must meet certain standards with regard to crushing strength, efflorescence, the quality and colour of exposed surfaces and weatherproofing. Shaping is accomplished by extrusion or soft moulding. The body density is not less than 1.8 kg/dm3 An outstanding quality of facing bricks is that they are easily adaptable to the multifarious wishes of architects and buildings owners.

<ind> The size of a facing brick varies from country to country, but is limited in volume as a "one hand" brick up to + or 2.5 dm3.

iv)<ind> Hollow clay bricks

16.<ind> As long as there are no particular demands with regard to surface quality and colour, because the wall is going to be stuccoed, these bricks are referred to as backing or common building bricks.

<ind> Shaping is accomplished only by extrusion.

<ind> According to industrial standards, hollow bricks are bricks with a density of not more than 0.80kg/dm3 (light weight hollow bricks) to not more than 1.2kg/dm3 (normal weight hollow bricks). As a role, this density is attainable only via a high proportion of cavities (> 40 %) in conjunction with supplementary aeration of the body.

<ind> Concerning raw material, a cheaper and lower quality clay is generally used in comparison with that used for clay facing bricks.

<ind> As a result of capital expenditure as well as technology, it would not be efficient or profitable to produce clay hollow bricks in a clay facing brick plant. The ratio capital expenditure/turnover for a clay facing bricks plant with a full capacity of 1000 m3 is about 1.70, whilst for a clay hollow bricks plant with the same capacity this ratio is 1.24.

<ind> Moreover, because of the specificity of the machines which are necessary for the manufacturing of clay facing bricks, it is not feasible to produce these latter in a plant planned for the manufacturing of clay hollow bricks.

17.<ind> Owing to the substantially different productiontechnology and investment in machinery, the cost and sales prices of clay facing bricks and clay hollow bricks are noticeably different. Based on the volume of a clay brick, the sales prices of a clay facing brick is 3 x higher than that of a clay hollow brick.

18.<ind> For the above reasons the Commission considers that from both the supply side and the demand side clay facing bricks and clay hollow bricks constitute two separate product markets.

3)<ind> Substitutability between clay facing bricks / hollow clay bricks and other building materials

19.<ind> There is little supplyside substitutability between clay bricks and other types of building materials because the raw materials, manufacturing processes, plant and unit costs of production are completely different. Manufacturers who produce both clay bricks and concrete bricks are very rare.

20.<ind> On the demand side, from a theoretical and technical point of view, clay facing bricks and hollow clay bricks are substitutable with other type of building materials. However the local traditions and consumer taste impose to a large extend the use of particular type of material. The different types of wall construction can be :

<ind> innerwall clay block + isolation + facing brick;

<ind> innerwall concrete block + plaster;<ind>

<ind> innerwall silica block + isolation + plaster;

<ind> natural stone;

<ind> hangup system;

<ind> sandwich system wall;

<ind> hollow clay bricks

<ind> The two first types mentioned above are traditionally used mainly in Belgium, the Netherlands and the north of France. In Germany and Austria construction with hollow clay bricks (with vertical cavities) or innerwall concrete block + plaster or innerwall silica block + isolation + plaster is usually preferred.

21.<ind> Hence, from the point of view of price, according to the parties and the competitors, a correct comparison between prices for any building material has to take into account the cost of the whole wall construction. An estimation of the cost of the various types of construction is shown in the following table.

Table 1 : Cost of wall systems

Type of wall systemconstructioncost per M2 ECU/M2

Clay facing bricks24 cm innerwall clay block + 4 cm isolation + facing brick154.30

Concrete blocks36.5 cm innerwall concrete block + plaster147.80

Silica blocks17.5 cm innerwall silica block + 7 cm isolation + plaster129.90

Natural stone172.60

Hangup systems145.60

Sandwich exterior wall129.47

monolytical exterior wall30 cm hollow clay bricks133.80

22.<ind> In conclusion, the Commission considers that differences of price, of technical and/or architectural characteristics and of consumer preferences are not sufficiently clear to conclude whether substitutability exists between clay facing bricks / clay hollow bricks and other building materials. However, as the joint venture created will be active only in the sectors concerning clay bricks, the narrowest market definition can be taken, i.e. clay facing bricks and clay hollow bricks.

B.<ind> Geographic reference market.

23.<ind> The competitors and the consumers questioned by the Commission have indicated that the geographic reference market for clay facing bricks, because of their relatively high unit price, would be at least national or crossborder regional (about 500kms), while that for the clay hollow bricks, because of their low price, would be defined as local (150 kms).

24.<ind> The parties have based their figures on national geographic markets. In fact, the location of their plants and of their sales appear to remain at a national basis.

25.<ind> It appears that most of the brick manufacturers (except the small manufacturers who are becoming marginal) operate on a national basis, with a regular spread of their plants, in order to be able to deliver the bricks at the lowest transportation cost. The spread ofthe plants is explained also by the necessity to be very close to an area of clay exploitation deposits.

26.<ind> In conclusion the Commission considers that the geographic reference market for clay facing bricks is at least national or crossborder (within a radius of about 500 kms), while for clay hollow bricks it remains local (within a radius of at the maximum 150 kms).

C.Competition assessment

27.<ind> Owing to the product specialisation of the parties and to their existing separate locations, (i.e.Koramic is active mainly in clay facing bricks in Belgium, the Netherlands and France, whilst Wienerberger is a strong producer of clay hollow bricks in Germany and Austria), the proposed operation is complementary in nature. It leads to an addition of market share, for clay facing bricks only within the regional crossborder area comprising Belgium, the Netherlands and Germany, and for clay hollow bricks only in the local market of middleeast Germany.

<ind> Market shares

28.<ind> The market shares in the tables below are indicated on the one hand for clay facing bricks only (on a national and crossborder basis in sales volume for 1995), and on the other hand for clay hollow bricks only (on a national basis and local basis in sales volume for 1995).

i)<ind> Clay facing bricks

Table 2 : market share clay facing bricks on a national basis

CLAY FACING BRICKS <ind> SALES VOLUME 1995 M2

<tab> Belgium

1000 M2 <tab> France 1000 M2 Netherlands 1000 M2 Germany 1000 M2 <tab> Austria 1000 M2

Total market <tab> 9075100%4215100% 10570100%16907100%25100%

Wienerberger <tab> [..](2)[..](3)[..](2)[..](3)[..](2)[..](3)[..](4)[..](3)[..](2)[.](5)

Terca <tab> [..](6) <tab> [..](7)[..](4)[..](8)[..](9)[..](7)[..](6)[..](10)[..](2)[.](3)

Wienerberger + Terca <tab> [..](6)[..](7)[..](4)[..](8)[..](9)[..](7)[..](9)[..](7)[..](2)[.](5)

1st competitor <tab> [...](6)[...](7)[...](4)[...](7)[...](4)[..](10)[...](4)[...](3)[...](2)[. ..](3)

2nd competitor <tab> [...](4)[..](10)[...](2)[...](7)[...](4)[..](10)[...](4)[...](3)[...](2)[. ..](3)

3rd competitor <tab> [...](2)[...](3)[...](2)[...](3)[...](2)[...](3)[...](2)[...](3)[...](2)[. ..](3)

4th competitor <tab> [...](2)[...](3)[...](2)[...](3)[...](2)[...](3)[...](2)[...](3)[...](2)[. ..](3)

Others <tab> [..](6) <tab> [..](7)[..](2)[..](3)[..](9)[..](11)[...](12)[...](13)[..](2)[.](7]

(2) Deleted for publication : 0 1000

(3) Deleted for publication : 0 10

(4) Deleted for publication : 1001 2000

(5) Deleted for publication : 71 80

(6) Deleted for publication : 2001 3000

(7) Deleted for publication : 21 30

(8) Deleted for publication : 41 50

(9) Deleted for publication : 3001 4000

(10) Deleted for publication : 11 20

(11) Deleted for publication : 31 40

(12) Deleted for publication : 8001 9000

(13) Deleted for publication : 51 60

29.<ind> The above table shows that on a national basis there is only one overlap for clay facing bricks, in Germany. The future entity will have to face competitors at least as strong as itself in Belgium, where the first competitor is Desimpel, which has recently been bought by the British group Hanson. In France and the Netherlands, Terca already holds a strong market position, although the structure of the market is different between these countries. Currently in France the market is relatively concentrated with, following Terca, the presence of two other strong companies, CRTC and Desimpel. In the Netherlands the market is more fragmented, withtwo medium competitors and a lot of small competitors. The first competitor, Rodruza, is a Dutch company and is active only on its domestic market. Desimpel is the second competitor on this market. In Austria, where in fact the supply of clay facing bricks is very limited, Wienerberger has incontestably an existing very strong position, whilst Terca is not active in this country and does not own plant in the crossborder area.

Table 3 : market share clay facing bricks on a crossborder basis

CLAY FACING BRICKSSALES VOLUME 1995 M2(2)

Belgium + Netherlands + Germany 1000 M2

Total market36552100%

Wienerberger[..](4)[..](3) %

Terca[..](14)[..](7) %

Wienerberger + Terca[..](12)[..](7) %

Desimpel[...](9)[...](3)

Boral[...](6)[...](3)

Vandersanden[...](4)[...](3)

Rodruza[...](4)[...](3)

Others[..](15)[..](13) %

(14) Deleted for publication : 7001 8000

(15) Deleted for publication : 19001 20000

30.In the crossborder area where the parties are both active the market appears relatively fragmented. The operation will lead to an addition of market share which is not very significant; in fact Wienerberger's activity is relatively limited in Germany and it is not present in Belgium or the Netherlands.

ii)clay hollow bricks

Table 4 : market share clay hollow bricks on a national basis

CLAY HOLLOW BRICKS <ind> SALES VOLUME 1995 M3

<tab> Belgium

1000 M3 <tab> France 1000 M3Netherlands 1000 M3 Germany 1000 M3 <tab> Austria 1000 M3

Total market<tab> 1712100%2074100% 220100%9641100%2729100%

Wienerberger<tab> [..](2)[..](3)[..](2)[..](3)[..](2)[..](3)[..](6)[..](7)[..](4)<tab> [..]

Terca<tab> [..](2)[..](7)[..](2)[..](3)[..](2)[..](7)[..](2)[..](3)[..](2)<tab> [..](3)

Wienerberger + Terca<tab> [..](2)[..](10)[..](2)[..](2)[..](2)[..](7)[..](6)[..](7)[..](4)<tab> [..](8)

1st competitor<tab> [...](2)[...](7)[...](2)[...](3)[...](2)[...](4)[...](10)[...](2)<tab> [..](3)

2nd competitor<tab> [...](2)[..](10)[...](2)[...](2)[...](4)[...](10)[...](2)[..](3)

3rd competitor<tab> [...](2)[..](10)[...](2)[...](2)[...](2)[...](3)[...](2)[..](3)

4th competitor<tab> [...](2)[...](3)[...](2)[...](2)[...](2)[...](3)[...](2)[..](3)

Others<tab> [..](2)[..](7)[..](4)[..][..](2)[..](5)[..](9)[..](11)[..](2)<tab> [..](87

31.For clay hollow bricks the markets within each country are relatively highly fragmented. In Belgium, the Netherlands and Austria the proposed operation will not lead to overlaps; in France and Germany overlaps will occur but, because they are insignificant, they will not change significantly the competition situation.

32.At a local level, an overlap will occur in middleeast Germany where, with [...](7)% of the market, the new entity will follow BTS which holds [...](11)% of this market.

Vertical integration

33.According to their needs claybrick producers either purchase clay (the principal component of clay bricks) from the owners of clay pits, buy pits from local authorities or private owners, or conclude longterm exploitation contracts. But, although the parties both own some pits, vertical integration at the upstream level is relatively low in the industry. Licences to exploit the clay pits are granted by national or local authorities, each claybrick producer being subject to the same rules in this respect. The market for clay pits is relatively open. Thus the upstream vertical integration of the parties creates no competition problems.

<ind> There is no vertical integration at the downstream level,since, in each country where they are present, the parties sell directly to independent distributors and do not own a distribution network.

VI.<ind> CONCLUSION

34.<ind> Terca and Wienerberger, which will constitute together the new entity, are already strong companies in the sectors of clay facing bricks and clay hollow bricks, However the investigation conducted by the Commission has shown that the proposed operation will not modify in the medium term the structure of the market, nor will the addition of the ressources of Koramic enhance the position of Wienerberger in Austria, which already has access to the financial resources of Creditanstalt. In fact the activities of the companies have a complementary character, as regards the product markets concerned as well as the geographic markets involved.

35.<ind> For the above reasons, the Commission has decided not to oppose the notified operation and to declare it compatible with the common market and with the functioning of the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of Council Regulation No 4064/89.

For the Commission,