CELEX: 32013M7044
Language: en
Date: 2013-11-29 00:00:00
Title: Commission Decision of 29/11/2013 declaring a concentration to be compatible with the common market (Case No COMP/M.7044 - BLACKSTONE / CAMBOURNE / GOLDMAN SACHS / ROTHESAY) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                            |EUROPEAN COMMISSION                                                                                              |
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                                        Brussels, 10.12.2013
                                        C(2013)9146 final

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|To the notifying party:                                            |                                                                   |
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Dear Sir/Madam,

Subject:    Case No COMP/M.7044 – Blackstone/ Goldman Sachs/ Rothesay Commission decision pursuant to Article 6(1)(b) of Council Regulation
         No 139/2004[1]

1. On 25 October 2013, the European Commission received notification of a proposed concentration pursuant to Article 4 of the  Merger  Regulation
   by which the Blackstone Group L.P. ("Blackstone", USA) and Goldman Sachs Group, Inc. ("Goldman Sachs"  USA)  acquire  within  the  meaning  of
   Article 3(1)(b) of the Merger Regulation joint control of the undertaking Rothesay Holdco UK Limited ("Rothesay", UK) by way  of  purchase  of
   shares (hereinafter the "proposed transaction").[2] Blackstone and Goldman Sachs are collectively designated hereinafter as the "the Parties".

I.    THE PARTIES

2. Blackstone is a global alternative asset manager and provider of financial advisory services in the  United  Stated  of  America,  Europe  and
   Asia. It operates as an investment management firm, as opposed to a conglomerate  or  a  holding  company.  Each  company  in  its  investment
   portfolio is independently managed and financed, and has different investors.

3. Goldman Sachs is a global firm that provides a wide range of banking, securities and  investment  services  worldwide  to  a  substantial  and
   diversified client base that includes corporations, financial institutions, governments and high net-worth  individuals.  Its  activities  are
   overall divided into four segments: (i) investment banking, (ii)  institutional  client  services,  (iii)  investing  and  lending,  and  (iv)
   investment management.

4. Rothesay is a holding company established by Goldman Sachs for the purpose of the  proposed  transaction  and  which  controls  Rothesay  Life
   Limited and Rothesay Pensions Management Limited. Rothesay Life Limited was established in 2007 as a regulated  insurance  company,  is  fully
   owned by Goldman Sachs and is primarily focused on defined benefit pension risk transfers within the UK. Rothesay Pensions Management Limited,
   which is also part of the proposed transaction, is the human resources vehicle of Rothesay Life Limited.

II.   THE OPERATION

5. The proposed transaction consists of the acquisition by Blackstone of approximately 29.9% of the voting shares and [20-30]%  of  the  economic
   interest in Rothesay. In parallel, two other investors, Cambourne  Life  Investment  PTE  Ltd  ("Cambourne")  and  Massachusetts  Mutual  Life
   Insurance Company ("MassMutual"), will respectively acquire 25% and 7% of the voting rights.

   Joint control

6. The Shareholders' Agreement contains a list of matters that require the written approval of each shareholder holding  more  than  [20-30]%  of
   the shares, namely Cambourne, Blackstone and Goldman Sachs, referred to as "qualifying shareholders".[3]  These  matters  relate  to  minority
   protection rights […].

7. In addition, the Shareholders’ Agreement contains a  list  of  reserved  matters  which  require  the  written  approval  of  each  qualifying
   shareholder, […].[4] This list contains matters relating to the strategic decisions of Rothesay, such as the  adoption  and  revision  of  the
   business plan and the budget, the appointment, removal or replacement of the Chairman  and  other  key  management  members  of  the  company,
   including the senior management.

8. The Shareholders' Agreement thus specifically distinguishes between the rights exercisable by Cambourne, together with Blackstone and  Goldman
   Sachs, and those exercisable only by Goldman Sachs and Blackstone. […]. Consequently, through the proposed transaction Blackstone and  Goldman
   Sachs will together acquire joint control over Rothesay.

   Full-functionality

9. Rothesay is currently, and will remain following the completion of the proposed transaction, full  function.  […].  Rothesay  is  autonomously
   active on the market as it holds an authorisation by the Prudential Regulation Authority of the Bank of England for being active in the  field
   of the insurance business. As Goldman Sachs does not hold the necessary authorisation, it is unable to interfere in the business of Rothesay.

10. With regard to the sourcing of upstream products and services, Rothesay sources certain back-office support functions from Goldman  Sachs  at
   arms' length on the basis of normal  commercial  conditions,  including  limited  support  for  collateral  management,  asset  and  liability
   operations, real estate and IT. Rothesay is also currently testing programmes offered by third party providers with the  aim  to  replace  the
   Goldman Sachs’ system. Rothesay estimates that within two years from closing of the proposed transaction, it will have  replaced  all  Goldman
   Sachs’ services. Finally, out of 61 employees, Rothesay directly employs 41 persons, including  the  management.  The  20  employees  who  are
   currently still seconded from Goldman Sachs will be transferred to Rothesay prior to the closing of  the  proposed  transaction.  Furthermore,
   Rothesay has the possibility to recruit its own personnel and has done so in the past two years.

11. For all the above reasons, the proposed transaction constitutes a  concentration  within  the  meaning  of  Article  3(1)(b)  of  the  Merger
   Regulation.

III.  EU DIMENSION

12. The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000  million[5]  (Blackstone:  EUR  […]  million;
   Goldman Sachs: EUR […] million; Rothesay: EUR […] million). Each of them has an EU-wide turnover in excess of EUR 250 million (Blackstone: EUR
   […] million; Goldman Sachs: EUR […] million; Rothesay: EUR […] million) and only Rothesay achieves more than two-thirds of their aggregate EU-
   wide turnover within the United Kingdom.

13. The notified transaction therefore has an EU dimension, within the meaning of Article 1(2) of the Merger Regulation.

IV.   COMPETITIVE ASSESSMENT

 1. Market definition

   1. Markets related to the activities of Rothesay

14. Rothesay is active in the market for de-risking of defined pension schemes in the UK. All pension schemes are presided over  by  a  board  of
   trustees ("the Trustees") that manages the assets and liabilities of the pension scheme.

                  (i) Product market definition

15. Pension scheme de-risking is a process whereby the Trustees or the corporate sponsor seek to manage or transfer  the  risks  associated  with
   the pension schemes to an insurer, bank, asset manager or actuarial firm. Rothesay's activities are only  relevant  with  respect  to  Defined
   Benefit ("DB") pension schemes, as only in relation to these schemes the risks are borne by the Trustees.

16. The Commission has previously defined the market for pension products as a sub-segment of life insurance,[6] without  looking  at  de-risking
   products. The Commission has in particular identified the following sub-segments of the life insurance market: (i) protection  products,  (ii)
   pension products, and (iii) savings and investment products.[7] Furthermore, the Commission previously  segmented  the  market  for  insurance
   products according to the category of customers to which the products are addressed, namely between life insurance to individuals and to group
   customers.[8] However, the Commission ultimately left open the exact product market definition.

17. The Parties submit that de-risking transactions (i.e. Buy-in, Buy-out,[9] and Longevity Swaps[10]) are part of an overall market for the  de-
   risking of DB pension schemes.

18. However, the exact product market definition for markets horizontally related to the activities of Rothesay can be left open for the  purpose
   of the present case as the proposed transaction will not give rise to serious doubts as to its compatibility with the internal market, in  any
   of the markets, irrespective of the precise product market definition.

                  (ii) Geographic market definition

19. The Commission has previously considered the related markets for pension products to be national in  scope  due  to:  (i)  the  existence  of
   national distribution channels; (ii) different regulatory frameworks and fiscal regimes; and (iii) different established brands. However,  the
   Commission ultimately left open the exact geographic market definition.[11]

20. The Parties submit that de-risking transactions have the same characteristics as the market for pension products,  and  that  the  geographic
   market should therefore be considered as national in scope. They argue, in particular, that as an insurance company  Rothesay  is  subject  to
   national regulation and supervised by national regulators (i.e. the Financial Conduct Authority and the Prudential Regulation Authority in the
   UK) and that Rothesay's services are aimed at UK DB pension schemes. Moreover, the de-risking transactions entered into by  Rothesay  and  its
   competitors primarily represent a UK-focused sector.

21. However, the exact geographic market definition for markets horizontally related to the activities of Rothesay  can  be  left  open  for  the
   purpose of the present case as the proposed transaction will not to give rise to serious doubts as to  its  compatibility  with  the  internal
   market in any of the markets irrespective of the precise geographic market definition.

   2. Other markets related to the activities of the parent companies

22. Blackstone's and Goldman Sachs’ activities overlap internationally in the areas of investment banking, financial market  services,  corporate
   finance, and the private equity segment of the corporate finance market and asset management services (even though they  typically  invest  in
   different assets).

23. Previously, the Commission has defined separate product markets for: (i) investment banking; and (ii)  financial  markets  services[12].  The
   Commission has also examined cases dealing with various private equity segments (in its  widest  sense,  as  equity  investments  in  unquoted
   companies), the supply of funds comprising equity and debt finance.[13] lending services,[14] securities lending,[15] Initial Public  Offering
   advisory services and equity and debt underwriting,[16] and asset management services. Asset management includes the  creation,  establishment
   and marketing of retail pooled funds (mutual funds, unit trusts, investment trusts and open-ended investment companies) and the  provision  of
   portfolio management services to pension funds, institutions, international  organisations  and  private  investors.[17]  The  Commission  has
   considered the possibly to further segment the market for asset management into retail and institutional  segments  and  based  on  investment
   strategy into active and passive investment. The Commission also pointed out  that  asset  management  excludes  the  provision  of  portfolio
   management services to individuals (so-called private banking).[18]

24. The exact product market definition was left open in all those cases. As far as the geographical scope of these  markets  is  concerned,  the
   Commission considered an EEA-wide or global dimension, without concluding on the exact definition.

25. In any event, for the purposes of this case, the exact product and geographic market definitions can be left open as no serious  doubts  will
   arise irrespective of the precise market definition.

 2. Competitive assessment

26. The Parties submit that the proposed transaction is a purely financial investment operation and that neither Blackstone  nor  Goldman  Sachs,
   nor any of their controlled portfolio companies, are active in the same markets as Rothesay.

27. The Commission considers that to the extent the Parties' activities overlap in markets which are unrelated to Rothesay's  activities,  namely
   investment banking, financial market services, private equity, and asset management services, the Parties' shares do  not  give  rise  to  any
   affected markets.

28. There are no overlaps between the activities of notifying parties and Rothesay in any potential product and  geographical  markets  resulting
   in a combined market share of 15% or more. Further, Goldman Sachs and Blackstone do not have an individual or combined market share at  either
   level of 25% or more in a potential product market which is upstream or downstream of a product market in which Rothesay is engaged.

29. Furthermore, spill-over effects in the meaning of Article 2(4) of the Merger Regulation as a  result  of  the  proposed  transaction  can  be
   discarded as none of the parents has activities in the same markets as the joint venture or in a market which is up or downstream from that of
   the joint venture or in neighbouring markets closely related to this market. Indeed, Rothesay and the parent companies perform different types
   of activities. Whereas Rothesay is active in the field of DB pension risk in the UK, Goldman Sachs provides investment banking, securities and
   investment management services globally, and Blackstone is active in the field of asset management and financial advisory services.

30. Finally, the joint venture only represents a small part of the parents´ portfolio, so  that  coordination  between  independent  undertakings
   that restricts competition within the meaning of Article 101(1) of the TFEU is highly unlikely.

V. CONCLUSION

31. 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.

                                        For the Commission
                                        (Signed)

                                        Joaquín ALMUNIA
                                        Vice-President

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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]   Publication in the Official Journal of the European Union No 2013/C 316/08
[3]   Schedule 4 (A) of the Shareholders' Agreement.

[4]   Schedule 4 (B) of the Shareholders' Agreement.

[5]  Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the CommissionConsolidated Jurisdictional Notice  (OJ  C95,
   16.04.2008, p1).

[6]         Case No COMP/M.6883 – Canada Life / Irish Life para 10.

[7]   Case No COMP/M.6883 – Canada Life / Irish Life para 10; Case No COMP/M.4701- Generali/PPF Insurance Business para 20; Case  No  COMP/M.4047
   - Aviva/Arik Life para 11.

[8]   Case No COMP/M.6883 – Canada Life / Irish Life, para 10 and Case No COMP/M.6883 – Talanx international /  Meiji  Yasuda  Life  Insurance  /
   Warta para 16; Case No COMP/M.4284 -AXA/Winterthur para 12.

[9]   Buy-in contract: trustees agree to purchase a policy for a single up-front premium. In  return,  the  insurer  agrees  to  pay  the  actual
   insured benefits of the relevant members. The trustees retain their administration role and their  relationship  with  the  members.  Buy-out
   works in almost the same manner as ‘Buy-in', except that the trustees will no longer have responsibility for managing the pension scheme  and
   meeting the annuity payments, and the relationship between the trustees and the members' transfers to the insurer.

[10]  Trustees may seek to transfer some or all of the responsibility for meeting  on-going  payments  to  policy   holders  to  a  third  party.
   Trustees may do so by purchasing insurance to cover them in the event that members live longer than expected. This solution is often referred
   to as a longevity swap which obliges the insurer (or bank) to pay schemes in respect of pension  payments  where  members  live  longer  than
   expected.

[11]  Case No COMP/M.6883 - Canada Life / Irish Life, para 19; Case No COMP/M.6521 - Talanx International / Meiji Yasuda Life Insurance /  Warta,
   para 54; Case No COMP/M.4701 – Generali / PPF Insurance Business, para 26.

[12]  Case No OMP/M.6168 – RBI / EFG Eurobank/JV paras 14-15; Case No COMP/M.3894 – Unicredito / HVB, paras 30-33; Case No COMP/M.2225  –  Fortis
   / ASR para 8; Case No COMP/M.1910 – Meritanordbanken / Unidanmark para 7; Case No COMP/M.1172 - Fortis AG / Generale Bank.

[13]  Case No COMP/M.2577 – GE Capital / Heller para 15.

[14]  Case No COMP/M.2577 – GE Capital / Heller para 16.

[15]  Case No COMP/M.3511 - Wiener Boerse et al/Budapest Stock Exchange/Budapest Commodity Exchange / KELER / JV para 14.

[16]  Case No COMP/M.2158 – Credit Suisse Group / Donaldson, Lufkin & Jenrette para 7.

[17]  Case No COMP/M.5580 – Blackrock / Barclays Global Investors UK Holdings para 9.

[18]  Case No COMP/M.5580 – Blackrock / Barclays Global Investors UK Holdings para 10.

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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