CELEX: 31992M0232
Language: en
Date: 1992-08-05 00:00:00
Title: COMMISSION DECISION of 05.08.1992 declaring a concentration to be compatible with the common market (Case No IV/M.232 - PEPSICO / GENERAL MILLS) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31992M0232

COMMISSION DECISION of 05.08.1992 declaring a concentration to be compatible with the common market (Case No IV/M.232 - PEPSICO / GENERAL MILLS) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 228 , 04/09/1992 P. 0000

 COMMISSION DECISION of 05.08.1992 declaring a concentration to  be compatible with the common market (Case No IV/M.232 -  PEPSICO / GENERAL MILLS) 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 Registered with advice of delivery To the notifying party Dear Sirs, Subject: <ind> Case No. IV/M232 - PepsiCo/General Mills <ind> <ind> <ind> Notification of 13.7.1992 pursuant to Article  4 of Council Regulation No. 4064/89.  1.<ind> On 13.7.1992, the Commission received a notification of  a proposed concentration whereby the undertakings General  Mills, Inc. and PepsiCo, Inc. will transfer respectively all  and parts of their European snack foods business to a newly  created company (NewCo).    2.<ind> After examination of the notification, the Commission  has concluded that the notified concentration falls within the  scope of Council Regulation No. 4064/89 (the Merger  Regulation), and does not raise serious doubts as to its  compatibility with the common market.  I.<ind> THE PARTIES AND THE OPERATION  3.<ind> PepsiCo is a US-based company active in the manufacture  and distribution of soft drinks and snack foods and in the  sector of convenience and family-style restaurants.  4.<ind> General Mills is a US-based company engaged in  restaurants and consumer foods, including snack foods.   5.<ind> General Mills will transfer to NewCo all of its  European snack foods business, which consists of operations in  Belgium, Holland and France. PepsiCo will transfer to NewCo its  snack foods businesses in Spain, Portugal and Greece, retaining  its European snack foods operations in the UK and Italy.  PepsiCo will hold 59,5% of the equity interest of NewCo, the  remaining 40,5% will be granted to General Mills in exchange  for the transfer of its European business.   II.<ind> COMMUNITY DIMENSION  6.<ind> The operation has a Community dimension. The worldwide  turnover of  PepsiCo and General Mills amounts in their last  financial year to Ecu 15,826 million and ECU 5,638 million.  General Mills' European snack foods operations which will be  transferred to NewCo amount to Ecu 252,4 million.  <ind> The aggregate Community-wide turnover of PepsiCo and the  snack foods business of General Mills is 1,113 and 250,3  million respectively. They do not achieve more than two-thirds  of their Community-wide turnover within one and the same Member  State.   III.<ind> CONCENTRATION  7.<ind> Following completion of the transaction, PepsiCo will  hold 59,5% of the equity interest of NewCo and the balance will  be held by General Mills. PepsiCo will have the overall  responsibility for NewCo's day-to-day management and will have  the right to appoint a majority (4 out of 7 members) of the  Supervisory Board. Decisions by the Board will be taken by  simple majority, except for acquisitions or divestitures  involving an affiliate of the parties where the purchase of  sale price exceeds 5% of NewCo's net asset base, and a special  provision allowing General Mills to monitor the value of, and  expected earnings from, its investment. Thus, NewCo will be  solely controlled by PepsiCo, General Mills retaining only  special rights in order to protect its investment in NewCo.  8.<ind> The notified operation therefore constitutes a  concentration within the meaning of Article 3 of the Merger  Regulation.  IV.<ind> COMPATIBILITY WITH THE COMMON MARKET  <ind> Relevant product market  9.<ind> NewCo will be engaged in the manufacture and  distribution of snack foods. The value of this overall market  within the Community was in 1991 around 20,900 million ECU. The  parties state that the relevant product market is that of  "macro snacks", which can be further classified into four main  market segments:  <ind> a)<ind> Savoury snacks, i.e. potato chips/crisps,  extruded and corn-based products, nuts and salty biscuits;  <ind> b)<ind> Sweet biscuits; <ind> c)<ind> Sugar confectionery and gum; <ind> d)<ind> Chocolate;   10.<ind> Savoury snacks comprises the only market segment where  both parents are active and is by value and volume by far the  most important snack foods segment for the parties concerned.  There is a high degree of substitutability between the  different savoury snacks products. They are in general  purchased for consumption in the same setting and eating  occasions, and are further comparable in terms of price.   11.<ind> In this case, the precise delimitation of the relevant  product market need not be specified  because even on the basis  of the narrowest conceivable market definition, e.g. a separate  market for crisps, the operation does not raise serious  doubts.  <ind> Geographic reference market  12.<ind> There are some indications that the relevant  geographic markets for snack foods could be considered to be  national. According to the parties, the snack foods business is  organised and operates at national level and is directed toward  largely national markets. This is indicated by the significant  differences in competitors' prices and market shares from one  national market to another. Further, each national "macro  snack" market tends to have unique taste preferences and thus  there is very little cross-border brand penetration.  13.<ind> It can however, be left open whether the relevant  geographic market is each Member State or the Community as a  whole because even on the basis of national geographic markets  the proposed operation does not raise serious doubts as to its  compatibility with the common market.  <ind> Competition assessment  14.<ind> The concentration will create the biggest manufacturer  for snack foods products in Europe. However, the horizontal  effects of the operation are limited. PepsiCo and General Mills  do not compete over the full range of snack foods. Only General  Mills manufactures sweet biscuits, and its sales are limited to  the French market.  PepsiCo has very limited sweet biscuits  sales in Italy which result from purchases made from a third  party. As regards chocolate and sugar confectionery, only  PepsiCo is active, with limited production and sales within the  Community. Both parties are engaged in the savoury snacks  market, but there exists a product overlap only as regards  potato chips, crisps and extruded products.  15.<ind> In addition, both parties are active in different  geographical areas of the Community. If the relevant  geographical market is considered as being national, there is  no overlap between the operations of PepsiCo and General Mills.  If it is considered as Community-wide there is an overlap, but  the market share of the parties is low (about 7% on the overall  snack foods market and less than 20% on each of the individual  product markets). Furthermore, the proposed concentration does  not involve any vertical or conglomerate links which would  adversely affect  competition in the Community. The  concentration will therefore not create or strengthen a  dominant position as a result of which effective competition  will be significantly impeded in the common market or in a  substantial part of it.  V.<ind> ANCILLARY RESTRAINTS  16.<ind> The non-competition obligations entered into between  the parties can be regarded as directly related and necessary  to the implementation of the concentration and is therefore  ancillary within the meaning of the Regulation.  VI.<ind> FINAL ASSESSMENT  17.<ind> For the above reasons the Commission has decided not  to oppose the notified concentration and to declare it  compatible with the common market. This decision is adopted in  application of Article 6(1) (b) of Council Regulation No.  4064/89.  For the Commission,