CELEX: 31993M0376
Language: en
Date: 1993-10-22 00:00:00
Title: COMMISSION DECISION of 22.10.1993 declaring a concentration to be compatible with the common market (Case No IV/M.376 - SYNTHOMER / YULE CATTO) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31993M0376

COMMISSION DECISION of 22.10.1993 declaring a concentration to be compatible with the common market (Case No IV/M.376 - SYNTHOMER / YULE CATTO) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 303 , 10/11/1993 P. 0000

 COMMISSION DECISION of 22.10.1993 declaring a concentration to  be compatible with the common market (Case No IV/M.376 -  SYNTHOMER / YULE CATTO) 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 parties Dear Sirs, Subject: <ind> Case No. IV/M.376 - Synthomer/Yule Catto  <ind>  <ind> Notification of 09.09.1993 pursuant to Council  Regulation (EEC) No.4064/89  1. <ind> The above mentioned notification concerns the proposed  acquisition by Yule Catto & Co. plc (Yule Catto) of 50% of the  share capital of Synthomer Chemie GmbH (Synthomer) from  Chemetall GmbH, part of Metalgesellschaft AG.  The other 50% in  Synthomer is owned by Reichhold Inc. (Reichhold). 2. <ind> After examination of the notification, the Commission  has concluded that the notified operation falls within the  scope of the application of Council Regulation No. 4064/89 and  does not raise serious doubts as to its compatibility with the  common market.  I. <ind> THE PARTIES  3. <ind> Yule Catto is a UK company active in the production,  sale and trading of speciality chemicals, especially natural  and synthetic latices.  Its other activity is the production  and sale of building products.  4. <ind> Reichhold is a US company active in the production,  sale and trading of polymers and adhesives.  Reichhold is part  of the Japanese chemical group Dainippon Ink & Chemicals Inc.  which is involved in the production, sale and trading of  printing inks, thermosetting resins and organic pigments.  5. <ind> Synthomer is a German company, at present jointly  owned and controlled by Chemetall and Reichhold, which already  operates on the market, primarily in the production and sale of  synthetic carboxylated latices, mostly in Germany.   II <ind> THE OPERATION  6. <ind> Yule Catto will acquire 50% of the shares in  Synthomer, the other 50% being owned by Reichhold.  These two  companies already own and jointly control another company,  Doverstrand Ltd. (Doverstrand), which is also active in the  production and sale of carboxylated latices, mainly in the UK.   The parties have agreed that Synthomer and Doverstrand will  operate as a single economic unit, with common purchasing,  development of integrated technologies and marketing of  customers.  A steering committee will be set up to this effect.  The proposed operation, therefore, concerns the production and  sale of carboxylated latices in Europe, especially the UK and  Germany.  III <ind> CONCENTRATION  Joint control  7. <ind> The shares and voting rights in Synthomer will be  divided equally between Yule Catto and Reichhold.  Decision  making takes place either by majority voting or unanimity for  certain matters.  As a result, Synthomer will be jointly  controlled by Yule Catto and Reichhold.  8. <ind> Synthomer is already an undertaking performing all the  tasks of an autonomous economic entity with its own assets,  staff, management, etc. and engaged in the business of selling  carboxylated latices.  Absence of coordination of competitive behaviour  9. <ind> Reichhold has no activities in carboxylated latices in  Europe other than through Synthomer and Doverstrand.  It does,  however, produce carboxylated latices in the USA.  In addition,  Dainippon produces carboxylated latices in Japan.  Imports from  these countries into Europe, however, can be discounted in view  of transport costs and for logistic reasons.  In relation to  the former, the parties estimate that the cost price of latices  imported from the USA would be 15-25% higher than the market  price for these products in Europe.  Transportation costs from  Japan would be significantly higher.  In addition, the setting  up of plant facilities by Reichhold/Dainippon in Europe is most  unlikely, for a number of reasons, including the presence of  the two joint ventures on this market, the high investment cost  for a new plant, and the fact that it would take up to five  years to start up a new plant.  In addition, current  overcapacities in Western Europe are around 20%.  Synthomer and  Doverstrand themselves have spare capacities.  Furthermore, on  the basis that the parents consider the geographical scope of  Synthomer and Doverstrand's activities to be Western Europe as  a whole, there is no prospect that the joint ventures would be  prevented, in principle, from  setting up new plants in any  part of Europe.  10. <ind> Reichhold's polymers activities in Europe are in  polyester, resins for coating and paints.  It also has a  sizeable adhesives business which is not, however, latex based.   Furthermore, its activities in emulsions, which include  acrylics for special applications, do not relate to the paper  industry.  11. <ind> Yule Catto does not produce carboxylated latices in  Europe, except through its joint venture Doverstrand.  It does  have a 36.75% indirect interest in a South African company  producing carboxylated latices.   Potential competition from  this company, however, can be excluded for the same reasons as  given for Reichhold and Dainippon above.  12. <ind> Yule Catto's Belgian company, Revertex SA, does sell  latices compounds which are used in the carpet industry.  The  latices are purchased on the open market, and mixed with  fillers, additives and processing chemicals.  The transport  costs are higher for compounds relative to their price which,  per tonne, is less than half the price of pure carboxylated  latices.  In general, therefore, the geographic scope of the  market for compounds is more limited for compounds than for  carboxylated latices.  In addition, as stated below, most  carpet producers in Belgium prefer to mix their own compounds.   For these reasons, any overlap between Revertex on the one  hand, and Doverstrand on the other in relation to these  compounds can be excluded.  In addition, Synthomer's own market  share for compounds in Belgium is very small.   In any event,  Revertex is moving away from such compounds into higher value  specialties, especially adhesives.  These are not based on  carboxylated latices.  13. <ind> In the light of the above factors there is no  appreciable risk of coordination between the parents or between  either of the parents and the joint venture.  IV <ind> COMMUNITY DIMENSION  14. <ind> The operation results in a change in the nature of  control in Synthomer.  In effect, it leads to the creation of a  new joint venture between the two parents Yule Catto and  Reichhold. 15. <ind> As such, the operation has a Community dimension.   The aggregate worldwide turnover of the parties exceeds 5,000  million ECU.  The aggregate Community-wide turnover of the  parties exceeds 250 million ECU.  They do not achieve more than  two-thirds of their turnover in one and the same Member State.  V <ind> DOMINANCE  Relevant product market   <tab> Affected markets   16. <ind> Carboxylated latices are a form of synthetic rubber,  which is produced in hot polymerisation from styrene and  butadine, both of which are derived from petrochemical raw  materials.  The product is characterised by internal gel  content, so that it does not need vulcanisation in order to  acquire elastic properties.  The main uses for carboxylated  latices are in the paper industry (for paper coating), the  carpet industry (as laminates between primary and secondary  carpet backing) and for special applications used in the  textile industry.  17. <ind> From a demand perspective there is no overlap between  carboxylated latices, on the one hand, and non-carboxylated  latices or natural rubber on the other.  Non-carboxylated  latices are used where elastomeric properties are important,  such as mattresses, foam and dipped goods, while the  applications of natural liquid rubber include belts, surgical  gloves, prophylactics and balloons.  In addition, there is no  supply substitutability between carboxylated latices and non- carboxylated latices or natural rubber because the production  process for carboxylated latices is entirely different from the  other two products.  18. <ind> In the paper industry there is technically a degree  of substitutability possible between carboxylated latices and  acrylic latex.  However, there are certain differences in the  properties of each (e.g. carboxylated latices are odourless).   In addition, acrylic latex is much more expensive, as a result  of which there is a trend away from its use.  19. <ind> It is possible that there are certain substitutes for  some of the many speciality applications of carboxylated  latices.  However, to the extent that this is the case, this  can be disregarded since the proposed operation does not create  or strengthen a dominant position in the common market on the  narrowest market.  20. <ind> Compounds based on carboxylated latices are a  downstream product from that of the latices themselves.   Compounds are mixtures of carboxylated latices, fillers (mainly  very cheap calcium carbonate), additives and processing  chemicals.  Compounds are used as backing material in carpets.   In principle, carpet producers may choose whether to purchase  the individual raw materials separately and to produce the  compounds themselves, or to purchase ready-made compound from a  local compounder or from producers of carboxylated latices, who  also produce compounds.  For historic reasons, most of the  Belgian and German carpet producers mix their own compounds,  whereas the opposite is true in the Netherlands.  21. <ind> To this extent, compounds may be considered  separately from carboxylated latices.  However, this issue is  not determinative since no dominant position is created even on  the narrower market definition.  Relevant geographic market  22. <ind> In markets where large volumes and short delivery  times characterise the business for carboxylated latices,  suppliers have installed local facilities in order to avoid  high transport costs of products which contain 50% water.   Thus, in the paper industry producers have built facilities  close to the markets in Germany, France, UK and in Scandinavia  (especially Finland).  In the carpet industry, customers in  Belgium and the Netherlands have attracted latices producers to  these markets.  23. <ind> Nevertheless, competitors who do not have local plant  facilities may still seek to participate on these markets, at  least to a limited extent, usually by stressing the  service/technical support facilities that their companies  provide.  In the case of specialty applications, moreover,  which involve a wide range of products with numerous small  customers and where margins are generally higher,  transport  costs of up to 20% of the sales prices can be afforded and  shipments within Europe (i.e. Western Europe) are possible.  24. <ind> Imports from outside Europe, by contrast, are  negligible, due to high transport costs, and also the limited  shelf life of the product.  25. <ind> It is not necessary to make a conclusion in this case  whether the geographic market is national or European because  even on the narrower market definition the proposed operation  does not give rise to a dominant position.  26. <ind> The geographic market for compounds is in any event  not bigger than any single Member State in view of the high  transport costs involved; (according to the parties it is  limited to approximately 100km  immediately surrounding a  compound factory) and the conditions of competition in Member  States are substantially different.  Assessment  27. <ind> In principle, since Yule Catto does not transfer any  business assets to Synthomer there is no change in the market  position of this joint venture on the market for carboxylated  latices.  As a result of the operation, however, both Synthomer  and Doverstrand will be jointly controlled by the same two  parents and will operate as a single economic unit on this  market.  28. <ind> By aggregating their respective market shares, the  parties estimate that Synthomer and Doverstrand will have  around [Read "less than 15%] of the Western European market for  carboxylated latices expressed in terms of volume [Business  secret.] for Synthomer, [Business secret.] for Doverstrand).   The overall volume of the market is estimated by the parties to  be around 489,000 tons.  29. <ind> The clear market leader in carboxylated latices is  DOW Chemical, the sixth largest chemical manufacturer in the  world, with a market share estimated by the parties to be about  [Read "Between 20% and 30%".].  Other players on the market are  Bayer, BASF and Rhône-Poulenc with between [Read "Less than  15%".] each.  Overall, therefore, the market is represented by  large chemical companies, capable of offering significant  competition to Synthomer and Doverstrand.  30. <ind> At a national level, the current cross-penetration of  Synthomer and Doverstrand into the other's principal territory  is minimal.  Doverstrand has an estimated market share of  around [Read "Less than 35%".] in volume terms in the UK.  DOW  and Bayer are both active also in this market, DOW having a  higher market share than Doverstrand, Bayer's position being  smaller.  Doverstrand is not active in Germany (although it has  supplied Synthomer with carboxylated latices in the recent  past).  Synthomer has an estimated [Read "Less than 25%".] of  the German market.   The main competitors in this country are  DOW, again the market leader, Huls and BASF.  31. <ind> With regard to customers of carboxylated latices  produced by Synthomer and Doverstrand, Synthomer sells about  [Business secret.] of its production into the carpet industry,  with the remaining [Business secret.] divided [Business secret]  between the paper industry and specialties.  Doverstrand, by  contrast, sells [Business secret] of its production into the  paper industry, the carpet industry representing around  [Business secret], the remaining [Business secret] in  specialties.  The operation therefore will not lead to any  significant strengthening of the two companies in any  particular customer base, but is by contrast more complementary  in nature.  32. <ind> In relation to compounds, Synthomer is active in the  Netherlands, and also to a minor extent in Belgium and Germany,  while Doverstrand is active only in the UK.  As a result, the  proposed operation will not lead to the creation or  strengthening of a dominant position in any of these markets.   33. <ind> In the light of the above factors the Commission  considers that the proposed operation will not lead to the  creation or strengthening of a dominant position for Synthomer  and Doverstrand in the common market.  ANCILLARY RESTRAINTS  34. <ind> The agreements provide that Chemetall shall not own,  control or have any direct or indirect financial interest in  any competing organisation for a period of five years from the  date of transfer of the shares.  This applies to the products  concerned by the operation and in the countries in which the  company currently sells these products.  This agreement is  directly related and necessary to the implementation of the  concentration and is, therefore, ancillary within the meaning  of the Regulation.  Final assessment  35. <ind> Based on the above findings the Commission has come  to the conclusion that the proposed concentration does not  cause serious doubts as to its compatibility with the common  market.  36. <ind> The proposed 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.   <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