CELEX: 32015M7671
Language: en
Date: 2015-09-17 00:00:00
Title: Commission Decision of 17/09/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7671 - KKR / FIBA / WMF) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 17.9.2015
C(2015) 6480 final

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|                                                                       |To the notifying parties:                                              |
|                                                                       |                                                                       |

Dear Sir/Madam,

Subject:    Case M.7671 - KKR / FIBA / WMF
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1] and Article 57 of the Agreement  on  the  European  Economic
Area[2]

 0. On 13 August 2015, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council  Regulation  (EC)  No
    139/2004[3] by which the undertakings KKR & Co. L.P. ("KKR") and FIBA Beteiligungs- und Anlage GmbH ("FIBA",  Austria)  acquire  within  the
    meaning of Article 3(1)(b) and 3(4) of the Merger Regulation joint control of the undertaking WMF  Group  GmbH  ("WMF",  Germany)  by  other
    means.

THE PARTIES

 0. KKR is a US global investment firm investing in companies in a variety of sectors. Its controlled portfolio companies  include  the  vending
    services company Selecta.[4]

 0. FIBA is an Austrian holding company with a main holding in the Austrian water technology company BWT AG ("BWT"). BWT offers products,  water
    treatment systems and services for: (i) drinking water, (ii) water for the pharmaceutical industry and process water, (iii)  heating  water,
    (iv) boiler and cooling water, (v) water in air-conditioning systems, and (vi) swimming pool water.

 0. WMF of Germany manufactures and distributes (i) table- and kitchenware and small electrical appliances for private  households  as  well  as
    (ii) table- and kitchenware and fully automated coffee machines for professional use.

THE OPERATION

 0. KKR currently indirectly holds [a majority] of the shares in WMF[5] while FIBA indirectly holds [a minority] of  the  shares  in  WMF.  FIBA
    currently does not hold any veto rights that would amount to control rights over WMF. WMF is therefore currently solely controlled by KKR.

 0. FIBA increased its shareholding to the current [minority] share pursuant to a participation agreement signed by KKR  and  FIBA  on  18  June
    2014. Under […] side agreement signed on 23 March 2015, FIBA will acquire certain additional rights with respect to the  management  of  WMF
    […].

 0. The rights to be acquired by FIBA relate, in particular, to:

      - […];[6]

      - […];[7]

      - […];[8]

      - […].[9]

 0. These rights taken together will grant FIBA the possibility of exercising  decisive  influence  on  WMF  since  it  will  have  veto  rights
    concerning essential decisions for WMF's strategic commercial behaviour.[10] Therefore, KKR and FIBA will acquire  joint  control  over  WMF
    pursuant to Article 3(1)(b) of the Merger Regulation.

EU DIMENSION

The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million[11] (KKR: EUR […]  million;  FIBA  :  EUR
[…] million). Each of them has an EU-wide turnover in excess of EUR 250 million (KKR: EUR […] million; FIBA: EUR […] million), but  they  do  not
achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State. The notified operation  therefore  has  an
EU dimension.

ASSESSMENT

 0. The proposed transaction leads to affected markets due to a vertical link between the sale of:

      -  water filter cartridges (where FIBA's BWT is active) upstream, and

      -  hot beverage machines (where WMF is active) and vending machines and services (where KKR's Selecta is active) downstream.

 0. Since FIBA will acquire control of WMF but not of Selecta, the vertical link is much more  direct  between  FIBA's  BWT  and  WMF  than  the
    vertical link between FIBA's BWT and Selecta. Nevertheless, the Commission has assessed both vertical links and has come to  the  conclusion
    that no serious doubts arise in this case even if the wider vertical link between BWT and Selecta is taken into account.

1 Water filter cartridges (upstream)

1 Market definitions

 0. Water filter cartridges serve the same purpose as table water filters in that they decalcify tap water and improve its  taste  and  quality.
    Water filter cartridges are sold to commercial customers and are built into coffee machines, ovens or  vending  machines.  WMF  and  Selecta
    purchase water filter cartridges for use in their table-top coffee machines and vending machines respectively.

 0. The Commission has not yet assessed the markets for water filter cartridges. While arguing that the product market definition can ultimately
    be left open, the Parties submit that the relevant product market includes at least[12] all water filter cartridges, irrespective  of  their
    use in coffee machines, ovens or vending machines, due to supply-side substitutability. They argue that the market is at least  EEA-wide  in
    geographic scope since industrial users purchase the products across borders, the major producers offer their products  EEA-wide  and  there
    are no technical differences between the filter cartridges sold in different countries.

 0. The replies received during the market investigation indicated that the main suppliers  of  water  filter  cartridges  are  able  to  supply
    different kinds of water filter cartridges and do not appear to specialize to  a  large  extent  in  the  production  of  certain  kinds  of
    cartridges (for use in coffee machines, ovens or vending machines). Furthermore, the main suppliers appear  to  be  able  to  provide  water
    filter cartridges throughout Europe. Nevertheless, the exact market definition can be left open in this case  as  no  serious  doubts  arise
    under the alternative market definitions.

2 BWT's competitive position in water filter cartridges

 0. The Parties submit that BWT's market share would be [5-10]% on an EEA-wide market for all water filter cartridges. They estimate that  BWT's
    market share at the national level would not exceed [20-30]% in any of the EEA member states.

 0. If separate markets were to be defined for water filter cartridges for use in each of coffee  machines,  ovens  and  vending  machines,  the
    Parties submit that BWT's market share would be slightly higher in the sale of water filter cartridges  for  coffee  machines  and  slightly
    lower in the sale of water filter cartridges for ovens. While the Parties are not able to calculate BWT's exact market share broken down  at
    that level, they submit that it would in any event remain below [10-20]% at the EEA-wide level for any of those potential sub-markets.

 0. In line with the Parties' submissions, the Commission's market investigation has not provided evidence for the Commission to  conclude  that
    BWT would hold a significant degree of market power on the upstream market.

2 Hot beverage machines and vending machines and services (downstream)

1 Market definitions

 0. WMF manufactures and sells professional fully-automated coffee machines.[13] KKR's  portfolio  company  Selecta  provides  vending  services
    through automated food and drinks machines equipped with a payment system.

 0. As regards WMF's activities, the Parties submit that the likely relevant market is the manufacture and sale of professional  fully-automatic
    table-top hot beverage machines at the EEA-level. As regards Selecta's activities, they argue  that  the  relevant  market  is  the  vending
    services market (or alternatively a sub-segment comprising only the vending of hot beverages) at the national or wider  level.  They  argue,
    however, that the market definitions can ultimately be left open.

 0. The Commission has previously considered, but ultimately left open a sub-segmentation of the market for food and drink distribution machines
    into (i) vending machines, (ii) beverage machines used in the  hotel,  restaurant  and  café  ("HoReCa")  sector  and  (iii)  office  coffee
    machines.[14] Within the market for vending machines, the Commission has considered, but ultimately left open,  a  further  sub-segmentation
    into machines for (i) hot and cold beverages, (ii) snacks and food and (iii) cans and bottles.[15] Moreover, the Commission has  assessed  a
    market for vending services and has considered as unlikely that a vending services market should be further sub-segmented by  the  type  and
    extent of vending services provided.[16]

 0. The Commission has found that the markets for food and drink distribution machines are  likely  to  be  national  in  geographic  scope  but
    ultimately left open in some decisions whether the scope could be wider. Among other things, customers and suppliers tend to operate at  the
    national level and suppliers need to be able to offer national service networks.[17] With respect to vending services,  the  Commission  has
    found that the market is national in scope for similar reasons.[18]

 0. The precise market definitions can be left open in this case as no serious doubts arise under the alternative market definitions.

2 WMF's competitive position in the supply of professional coffee machines

 0. According to the Parties' estimates, WMF's share in a market for professional fully-automated table-top hot beverage machines  would  exceed
    30% in Belgium, the Czech Republic and Germany. While the Parties have not been able to submit market shares for  all  EEA  countries,  they
    argue that the market shares in those countries will not be higher, and are likely to be significantly lower, than  WMF's  market  share  in
    Germany where WMF is based and that is its core market.

      Table 1 WMF's market shares in the affected markets

|Country                      |WMF market share (by value)  |WMF market share (by volume) |
|Belgium                      |N/A                          |[30-40]%                     |
|Czech Republic               |N/A                          |[30-40]%                     |
|Germany                      |[30-40]%                     |[10-20]%                     |

 0. According to the Parties' estimates, WMF's market share would not be materially different if the market was  further  sub-divided  into  hot
    beverage machines sold to the HoReCa sector and machines for office coffee supply.

 0. While the Parties have not been able to provide market share estimates for their  competitors,  they  submit  that  competitors  Franke  and
    Thermoplan compete with WMF in all of the affected markets while, in addition, Melitta, Carimali and Cimbali compete with  WMF  in  Belgium,
    the Czech Republic and Germany respectively.

3 Selecta's competitive position in vending machines and services

 0. The Parties estimate that Selecta's market share in vending machines and services only exceeds 30% in the national market[19] in Sweden.

      Table 2 Selecta's market shares in the affected market

|Country           |Selecta market share (by value) in all     |Selecta market share (by value) in hot     |
|                  |vending                                    |beverage vending                           |
|Sweden            |[30-40]%                                   |[30-40]%                                   |

 0. According to the Parties, Jobmeal Sverige ([10-20]% market  share[20]),  Autobar  Sverige  ([10-20]%)  and  Nestlé  Sverige  ([10-20]%)  are
    Selecta's most important competitors in Sweden.

3 Assessment of the vertical link

 0. Input foreclosure concerns are highly unlikely to occur in this case since BWT has a limited market position in the  sale  of  water  filter
    cartridges regardless of the device in which the filter cartridges are installed and therefore does not have a significant degree of  market
    power in the upstream market.

 0. As regards customer foreclosure, two competitors of BWT have expressed concerns as regards access to  WMF  coffee  machines  or  to  Selecta
    vending machines to sell their filter cartridges. One of these suppliers explained that access to WMF will be rendered more difficult  after
    the merger due to a deepened relationship between BWT and WMF.  One of the suppliers also explained that it expects selling  to  Selecta  to
    become more difficult after the transaction.

 0. However, the Commission found that BWT has been WMF’s almost exclusive supplier of filter cartridges for many years and that there  were  no
    changes regarding WMF's suppliers between 2013 and 2015. As purchases from third parties have been immaterial in the  last  two  years,  the
    transaction is not likely to have any effect on WMF's purchasing policy. Likewise, Selecta's purchasing policy has not changed in  the  last
    two years as Selecta has been buying stable volumes of filter cartridges from the same supplier, with whom Selecta has signed a […] contract
    in 2014. No changes are therefore expected in that regard as a result of the merger.

 0. One competitor also claimed that FIBA already holds a stake in different coffee machine companies and therefore has an advantage in  selling
    its cartridges over its competitors which could be strengthened further through the transaction. The Commission has been  able  to  confirm,
    however, that FIBA does not have any shareholdings or any other structural links with the coffee machine companies listed by the competitor.

 0. Moreover, WMF's and Selecta's position in the downstream markets appear to be limited,  as  outlined  in  paragraphs  21  to  25  above.  In
    addition, neither WMF nor Selecta represent a significant volume of purchases of filter cartridges for coffee machines or  vending  machines
    according to the Parties' estimates (respectively [0-5]% of the total EEA purchases of filter cartridges for coffee machines and [0-5]%.  of
    the total EEA purchases of filter cartridges for vending machines). Therefore, there will in all likelihood remain an  alternative  customer
    base for BWT's competitors in the sale of water filter cartridges. Furthermore, the value of the water  filter  cartridges  represents  only
    between [0-5]% of the value of the coffee machines, ovens and vending machines, making it unlikely  that  a  customer  foreclosure  strategy
    would be profitable in this case.

CONCLUSION

 0. For the above reasons, the European Commission has decided not to oppose the notified operation  and  to  declare  it  compatible  with  the
    internal market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger Regulation and  Article
    57 of the EEA Agreement.

For the Commission
(Signed)
Margrethe VESTAGER
Member of the Commission

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[1]   OJ L 24, 29.1.2004, p. 1 ('the Merger Regulation'). With effect from 1 December 2009, the Treaty on the Functioning of the  European  Union
('TFEU') has introduced certain changes, such as the replacement of 'Community'  by  'Union'  and  'common  market'  by  'internal  market'.  The
terminology of the TFEU will be used throughout this decision.

[2]   OJ L 1, 3.1.1994, p.3 ("the EEA Agreement").

[3]   OJ L 24, 29.1.2004, p. 1 ('the Merger Regulation').

[4]   The Commission cleared KKR's acquisition of control over Selecta in 2014 in case M.7319 – KKR/Allianz/Selecta.

[5]   The Commission cleared KKR's acquisition of control over WMF in 2012 in case M.6688 – KKR/Württembergische Metallwaren Fabrik.

[6]   Section 10 paragraph 3 of the participation agreement; in case of a tie vote, […].

[7]   Section 10 paragraph 4 in conjunction with section 8 paragraph 2 of the participation agreement.

[8]   Ibid.

[9]   Ibid.

[10]  See the Commission Consolidated Jurisdictional Notice, OJ C 95, 16.4.2008, p.1, paragraphs 65ff.

[11]  Turnover calculated in accordance with Article 5 of the Merger Regulation.

[12]  The Parties argue that chemical solution for water filtering, such as tablets, powder or liquid, could also belong to the same market.

[13]  While WMF also targets consumers to a certain extent, only machines belonging to WMF's  professional  coffee  machines  segment  use  water
filters of BWT.

[14]  Cases M.5338 – Barclays/Investcorp/N & V Global Vending, recital 12; M.6857 –  Crane  Co/MEI  Group,  recital  91;  M.7319  –  KKR/Allianz/
Selecta, recital 20.

[15]  Case M.5338 – Barclays/Investcorp/N & V Global Vending, recital 13; case M.5973 – CVC/Charden International, recital  13;  M.6857  –  Crane
Co/MEI Group, recital 93; M.7319 – KKR/Allianz/ Selecta, recital 20.

[16]  Cases M.2373 – Compass/Selecta, recitals 14–17, M.4202 – Charterhouse/Elior, recitals 15-16; M.5973 – CVC/Charden  International,  recitals
12-13, M.7319 – KKR/Allianz/Selecta, recital 15.

[17]  Cases M.5338 – Barclays/Investcorp/N & V Global Vending, recital 13, recitals 21-22; M.7319 – KKR/Allianz/Selecta, recital 17;  the  market
for vending machines was found to be EEA-wide, however, see case M.6857 – Crane Co/MEI Group – recitals 98-100.

[18]  Cases M.2373 – Compass/Selecta, recitals 26-27, M.5973 – CVC/Charden International, recital 16; the definition was left open,  however,  in
case M.4202 – Charterhouse/Elior, recital 23.

[19]  The Parties have only presented the market shares for vending machines and services for national  markets  where  BWT  sells  water  filter
cartridges and where Selecta offers vending machines and services.

[20]  The market shares in this paragraph refer to all vending as well as to vending of hot beverages.

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 In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC)  No  139/2004
 concerning non-disclosure of business secrets and other confidential information.  The  omissions  are  shown  thus  […].  Where  possible  the
 information omitted has been replaced by ranges of figures or a general description.

                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE
                                                              ARTICLE 6(1)b DECISION