CELEX: 31995M0664
Language: en
Date: 1995-12-11 00:00:00
Title: COMMISSION DECISION of 11/12/1995 declaring a concentration to be compatible with the common market (Case No IV/M.664 - GRS Holding) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31995M0664

COMMISSION DECISION of 11/12/1995 declaring a concentration to be compatible with the common market (Case No IV/M.664 - GRS Holding) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 008 , 13/01/1996 P. 0004

 COMMISSION  DECISION of 11/12/1995 declaring a concentration to be compatible with the common market (Case No IV/M.664  - GRS  Holding)  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.664  GRS Holding <ind> <ind> Notification of 10.11.1995 pursuant to Article 4 of Council Regulation No 4064/89 1.<ind>  On  the 10 November 1995 Nomura International  plc. ("NI")  notified  an  operation by  which  it  will  acquire control  of  Angel  Train  Contracts  Limited  ("ATC").  The transaction  forms a first step in the UK rail privatization process. 2.<ind>   After   examination  of  the   notification,   the Commission  has concluded that the proposed operation  falls within  the scope of the Council Regulation No 4064/89  (the Merger Regulation) and does not raise serious doubts  as  to its  compatibility  with  the common  market  and  with  the functioning of the EEA Agreement. I. <ind> The Operation and the Parties 3.<ind> NI is a wholly owned subsidiary of Nomura Securities Co.  Limited,  an  international investment  bank  based  in Japan.  NI's principle activities are in brokerage,  trading and  the  underwriting of securities and  the  provision  of corporate finance and investment advisory services. 4.<ind>  ATC  is one of the three ROSCOS which will  provide railway  passenger rolling stock, through operating  leases, to   Train  Operating  Companies  ("TOCS").  ATC   is   also responsible  for certain heavy maintenance  of  the  rolling stock. 5.<ind>  GRS Holding is the holding company of ATC  and  its shares  are  held  equally by Prideaux & Associates  Limited ("P&A")  and Babcock & Brown (UK) Holdings Limited  ("B&B"). P&A  is  a  business  advisory company providing  specialist services  in the merger and acquisition and project  fields, with a particular emphasis on railway related projects.  B&B is a subsidiary of Babcock & Brown Holdings Inc a specialist in asset financing, leasing and tax based financing advisory company,   with  particular  specialisation   in   transport equipment. 6.  <ind>  The  concentration consists of an acquisition  of sole  control  of  ATC by NI through GRS  Holding  which  is controlled by NI by means of contractual rights conferred by a   Cooperation  Agreement.  According  to  the  Cooperation agreement,  NI, will hold warrants entitling it  to  acquire [Deleted  business secret.] of the ordinary  shares  of  GRS Holding.  In addition, NI may acquire shares from defaulting parties  and require the other parties to sell their  shares and/or warrants in certain circumstances. None of the  other shareholders  are allowed to dispose of any of their  shares in  GRS  Holding without the consent of NI for  a  specified duration. II.<ind> Community Dimension 7.<ind>  The  operation  has  a  Community  dimension.   The worldwide turnover of all the undertakings concerned exceeds ECU 5 billion. In 1994/95 NI had turnover of ECU 8.3 billion (calculated in accordance with Article 5(3)) and ATC of  ECU 373  million, of which 100% was achieved within  the  United Kingdom. The Communitywide turnover of each of at least  two of  the  undertakings concerned exceeds ECU 250 million  and the   undertakings  concerned  do  not  achieve  more   than twothirds  of their aggregate Communitywide turnover  within one and the same Member State. III.<ind> Compatibility with the Common Market <ind> The relevant product market 8.<ind> NI has submitted that the relevant product market is the provision of passenger rolling stock by way of operating leases.  However  it  is necessary to consider  whether  the method   of  financing  this  provision  is  relevant.   The provision of rolling stock through operating leases  differs from  the provision of rolling stock either through  finance leasing  or  by  outright purchase by  the  train  operator. Operating  leases are structured over a shorter period  than the  economic life of the asset and, consequently, are aimed at  a  shorter period of supply, geared to the needs of  the TOCS, which have franchises limited to some 710 years. 9.<ind> Finance leasing, on the other hand, is generally  of a longer period and fully repays the asset cost resulting in the  transfer  of ownership of the product  to  the  lessee. Similar  considerations apply to the  outright  purchase  of passenger  rolling  stock therefore also differentiating  it from  rolling  stock  provided on  the  basis  of  operating leases. 10.<ind>  However,  for  the  purposes  of  this  case,  the question  of  whether  the  type of  financing  changes  the definition of the relevant product market can be  left  open as, on the basis of the assessment set out below, a dominant position  would not be created or strengthened even  on  the narrowest definition of the product market. <ind> The relevant geographic market 11.<ind>  The  relevant geographic market is Great  Britain. This  is  because,  at  present, it is  understood  that  no opportunities   exist  in  other  Member  States   for   the independent  provision of passenger rolling stock  to  train operating companies. Furthermore, restrictions on the design and  construction  of the rolling stock and  track  make  it impossible  to provide passenger rolling stock designed  for Great Britain without a fundamental redesign of the existing stock,  to other Member States. Finally it should  be  noted that railways operating in Northern Ireland are, at present, excluded from the privatization process. <ind> Assessment 12.<ind> The acquisition only has an impact in Great Britain and there is no overlap between the operations of NI and GRS Holding and ATC. 13.<ind>  Following this step in the privatization  process, the  provision of passenger rolling stock to the  twentyfive TOCS will be carried out by the three ROSCOS which will have an approximate market share of 33% each. These market shares arise  due  to the fact that each ROSCO has been granted  an approximately  equal  share  of existing  passenger  rolling stock  of  an equal average age. Furthermore each ROSCO  has been  endowed with operating leases, of similar lengths  and values, that already exist with the TOCS. 14.<ind>  The  purpose  of the sale  of  the  ROSCOS  is  to introduce  competition into the market for the provision  of passenger  rolling stock. At the outset it may  appear  that competition  may be restricted due to the market  shares  of the  three ROSCOS and specifically of ATC. However it should be  noted that the TOCS, on renewal of the operating leases, will  be  able  to choose between the various  providers  of passenger  rolling  stock.  Furthermore,  therewill  be   no regulatory restrictions or licence requirements (other  than those  appertaining  to safety) preventing  other  operators entering  the market. In this respect, and in the  light  of the   Commission's   enquiries,   it   would   appear   that manufacturers of passenger rolling stock may be willing,  in the  short term, to supply such equipment, on the  basis  of operating or finance leases, to the TOCS. 15.<ind>   Consequently  it  is  not  considered  that   the acquisition of ATC by NI creates or strengthens  a  dominant position in the common market. IV.<ind> Ancillary restrictions <ind> Noncompetition clauses 16.<ind>  Clauses  4.2,  4.3 and 4.4  (as  amended)  of  the Cooperation  Agreement,  clauses 2.2  and  3.6  of  the  P&A Consultancy Agreement and clauses 2.1, 2.2 and  3.8  of  the B&B  Consultancy Agreement place restrictions on the parties as regards the acquisition of an interest in a competitor or the  provision  of services to the same. In addition  it  is provided that the minority shareholders can not entice  away employees from GRS Holding during the minority shareholders' period  of beneficial interest. These clauses either  impose periods of noncompetition on the parties, of between 28  and 88  months,  or periods limited in time to the reduction  of NI's  interest,  in GRS Holding, to below [Deleted  business secret.]  or  [Deleted business secret.] in respect  of  the provision of services and the acquisition of an interest  in a competitor or the enticing away of an employee. 17.<ind>  The  geographic dimension of these  noncompetition clauses is widely drawn. Whilst it is appropriate that  such clauses should be made with respect to other ROSCOS and TOCS it  is not believed to be necessary to exclude other lessors of   rolling  stock  operating  in  the  UK  or  all   train manufacturers worldwide. Therefore, to the extent that these noncompetition  clauses operate inside Great  Britain,  they can be considered as ancillary restrictions directly related and necessary to the implementation of the concentration. <ind> Restriction on transfer of warrants 18.<ind>  Clauses  7.1,  7.2 and 7.3  (as  amended)  of  the Cooperation Agreement provide that the minority shareholders may  not,  subject to certain exceptions, dispose  of  their warrants  except  with NI's consent.  This  forms  a  normal commercial arrangement and can be considered as an ancillary restriction   directly   related  and   necessary   to   the implementation of the concentration. V.<ind> Conclusion 19.<ind> For the above reasons, the Commission has concluded that the notified operation does not raise serious doubts as to  its  compatibility 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,