CELEX: 32015M7465
Language: en
Date: 2015-01-28 00:00:00
Title: Commission Decision of 28/01/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7465 - ARKEMA / BOSTIK) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

                                        Brussels, 28.1.2015
                                        C(2015) 490 final

                                        |To the notifying party:                                                |                                                                       |

Dear Sir/Madam,

Subject:    Case M.7465 – ARKEMA / BOSTIK

         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]

    1) On 12 December 2014, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council  Regulation  (EC)
       No 139/2004 by which the undertaking Arkema S.A. (Arkema, France), acquires within the meaning of Article 3(1)(b) of the Merger Regulation
       control of the whole of the adhesives and sealants business of Total S.A. (Bostik, France) by way of purchase of shares.[3]

    2) Arkema is hereinafter referred to as the “Notifying Party”.

       THE PARTIES

3) Arkema is active worldwide in the production, distribution and sale of chemical products. Its activities are organised around  three  business
   segments: coating solutions, industry specialties and high performance materials.

4) Bostik designs and manufactures adhesives and sealants for three key markets: industry,  construction  and  consumer.  Bostik  has  production
   facilities around the world.

       EU DIMENSION

5) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million[4] (Arkema: EUR 6 098 million,  Bostik
   EUR 1 505 million).  Each of them has an EU-wide turnover in excess of EUR 250 million (Arkema: EUR 2 377 million, Bostik: EUR  655  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.

6) Therefore, the proposed transaction has an EU dimension within the meaning of Article 1(2) of the Merger Regulation.

       RELEVANT MARKETS

1 Introduction

7) The proposed transaction gives rise to horizontal overlaps in relation to the manufacturing of adhesives and sealants, without however  giving
   rise to affected markets within the meaning of the Merger Regulation.

8) The transaction leads also to vertical links between the upstream markets for the production of raw materials  by  Arkema  (acrylic  monomers,
   dicarboxylic acids, polyester polyols, high content ethylene-vinyl acetate (EVA), polyamids, water-based  resins,  rheological  additives  and
   polyethylene polyolefins), and the downstream market for manufacturing adhesives and sealants. Depending on the market definition these  links
   could lead to affected markets for the upstream markets of acrylic monomers (glacial acrylic acid (GAA)  and  2-ethylhexyl  acrylate  (2EHA)),
   dicarboxylic acids (sebacic acid), rheological additives for  non-aqueous  applications  based  on  polyamide  powders  and  epoxide  ethylene
   copolymers (which belong to polyethylene polyolefins).

2 Product and geographic markets

1 Adhesives and sealants

9) Adhesives are specifically developed to hold or stick objects together; sealants offer means  for  leakage  control  of  fluids  or  gases  or
   prevent the ingress of atmospheric components into an assembly. The Notifying Party submits that adhesives and sealants are part of  the  same
   relevant market, since they are used for the same applications, they are produced from the same raw materials and there is no  clear  business
   distinction between adhesives and sealants.

10) In previous decisions[5] the Commission considered a possible distinction between adhesives and sealants,  but  ultimately  left  the  market
   definition open.  Furthermore, in the past cases the Commission categorised adhesives and sealants into three end-use groups: i) adhesives and
   sealants for consumers, ii) adhesives and sealants for craftsmen and  “Do  It  Yourself”  and  iii)  adhesives  and  sealants  for  industrial
   applications.  As regards the adhesives and sealants for industrial applications the Commission considered further segmentations according  to
   the specific application (e.g. automotive, shipbuilding) and according to the technologies used within each application.

11) The Commission considered in its previous decisions that the geographic market for industrial adhesives may vary  depending  on  the  segment
   concerned. In most cases the Commission considered that the market was EEA-wide in scope.[6]

12) In any event, for the purpose of the present transaction, the exact product and geographic market definition can  be  left  open,  since  the
   transaction does not raise competition concerns as regards production of adhesives and sealants irrespective of the market definition.

2 Acrylic monomers – GAA

13) GAA is made of crude acrylic acid and is part of the bigger family of acrylic monomers. In previous decisions[7] the Commission identified  a
   single relevant product market of GAA and considered that it was not necessary to make a further segmentation within GAA.  The Notifying Party
   agrees with the Commission’s findings.

14) As regards the geographic market in its previous decisions the Commission considered the geographic market for GAA to be  at  least  EEA-wide
   because “customers have a clear preference to source GAA in the region where they are active” and because “there can be price differences  for
   GAA between world regions, although not within the EEA”.[8] The Notifying Party also submits that the geographic market for GAA is EEA-wide.

15) In any event, for the purpose of the present transaction, both product and geographic market definition with regard to GAA can be left  open,
   since the transaction does not raise competition concerns irrespective of the market definition.

3 Acrylate esters - 2EHA

16) Acrylate esters are produced in the process of esterification between crude acrylic acid and an alcohol. They  impart  various  qualities  to
   the polymeric materials in which they are used, such as colour stability, heat and aging resistance, low temperature, flexibility, etc.

17) In previous decisions the Commission concluded that various esters, such as  2EHA,  constitute  distinct  relevant  product  markets.[9]  The
   Notifying Party agrees with the Commission findings.

18) As regards the geographic market, in its previous decisions relating to acrylate ester (butyl acrylate,  a  “heavy”  ester,  like  2EHA)  the
   Commission considered the relevant market for that acrylate ester to be at least EEA-wide. The Commission considered that butyl acrylate is  a
   commodity product traded on a global basis, there were however price differences between the EEA and other world  regions.[10]  The  Notifying
   Party submits that the market for 2EHA is also EEA-wide for the same reasons as those developed for butyl acrylate.

19) In any event, for the purpose of the present transaction, the exact product and geographic market definition as regards the  acrylate  esters
   can be left open, since the transaction does not raise competition concerns irrespective of the market definition.

4 Dicarboxylic acids

20) Dicarboxylic acids are monomers used for the polymerization reaction  to  form  copolyester  resins  (used  in  packaging,  home  appliances,
   consumer goods, cosmetics etc.). Dicarboxylic acids can be subdivided into i) aromatic  dicarboxylic  acids  and  ii)  aliphatic  dicarboxylic
   acids. The latter include sebacic acid, produced by Arkema.

21) The Commission has not considered the existence of a market for sebacic acid or dicarboxylic acids so far. The Notifying  Party  states  that
   from the supply-side perspective all acids included in the aliphatic dicarboxylic  acids  may  not  be  substitutable  (one  producer  usually
   produces only one type of dicarboxylic acid).  However, according to the Notifying Party the aliphatic acids are  largely  substitutable  from
   the demand-side. In particular, it is claimed that variations in prices of different dicarboxylic acids can lead to subsequent changes in  the
   client’s product mix.

22) Consequently the Notifying Party argues that dicarboxylic acids constitute a distinct relevant product market, which includes sebacic acid.

23) The Notifying Party claims that the relevant geographic market as regards the dicarboxylic acids is at least EEA-wide, or even worldwide,  as
   producers of dicarboxylic acids supply customers around the world irrespective of the distance and prices  do  not  differ  to  a  significant
   extent within the EEA territory.

24) In any event, for the purpose of the present transaction, the exact product and geographic market definition can  be  left  open,  since  the
   transaction does not raise competition concerns irrespective of the market definition.

5 Rheological additives

25) Additives are chemical products which are added in small quantities to different compounds in  order  to  modify  their  properties  such  as
   plasticity, rigidity, transparency or flexibility. Rheological additives act as thickening or  anti-settling  agents  and  they  are  used  in
   coatings, paints, inks, cosmetics, construction products and  adhesives.  Each  applicative  technology  (i.e.  water-based  or  solvent-based
   applications) requires specific rheological additives.

26) In previous decisions the Commission considered separate markets for rheological additives  for  water  based  applications  and  rheological
   additives for solvent based applications. The Commission suggested that further segmentation according to the chemical  composition  could  be
   appropriate but left the market definition open.[11]

27) The Notifying Party submits that the relevant distinction for  rheological  additives  is  between  (i)  water-based  or  (ii)  non  aqueous,
   including solvent based applications. The Notifying Party claims that further segmentation based on chemical  composition  is  not  necessary,
   because all chemical compositions have the same objective of modifying the rheology of the final formulations.

28) In its previous decisions the Commission has considered the relevant geographic market for rheological additives to be at least  EEA-wide  in
   scope due to insignificant transport cost, similar prices across Member States and no barriers to trade.[12] The Notifying Party supports  the
   Commission's findings.

29) In any event, for the purpose of the present transaction, the exact product and geographic market definition of rheological additives can  be
   left open, since the transaction does not raise competition concerns irrespective of the market definition.

6 Polyethylene polyolefins

30)  A polyolefin is any class of polymers produced from a simple olefin as a monomer. Polyethylene is the polyolefin  produced  by  polymerizing
   the olefin ethylene. It is the most common plastic, primary used in packaging (plastic  bags,  plastic  films,  containers  including  bottles
   etc.).

31) In previous decisions[13], the Commission considered that the market for polyolefins is divided between different sub-segments  including  in
   particular polyethylene. Polyethylene based on the production methods, performance characteristics and differences in end-uses can be  divided
   into three distinct sub-markets, namely low-density polyethylene (LDPE), high-density polyethylene (HDPE) and linear low-density  polyethylene
   (LLDPE). According to the Notifying Party, Arkema's products named Lotader MAH, Lotader GMA and Lotryl form part of the LDPE market.  LDPE  is
   mainly used in packaging, i.e. for manufacturing of various containers, dispensing bottles, plastic bags etc.

32) The Notifying Party submits that the market for LDPE could be further segmented on the basis of  the  type  of  copolymer  and  the  type  of
   reactor used in the manufacturing process, amongst others, giving rise to the following relevant markets i) the market of acid copolymers,  to
   which Lotader MAH belongs ii) the market of epoxide ethylene copolymers, to which Lotader GMA belongs and iii) the market of ethylene acrylate
   copolymers, to which Lotryl belongs.

33) The Commission has previously assessed the LDPE market and it has left open whether LDPE is a separate market or it forms part  of  a  larger
   product market together with some LLDPE products.[14] The Commission noted that within each group of polyethylene (LDPE, HDPE and LLDPE) there
   are different grades produced by varying the conditions of polymerization or by using different additives, but it did not consider  a  further
   segmentation of the LDPE market.[15]

34) As regards the geographic market, in its previous decisions the Commission has considered the relevant geographic market for LDPE  to  be  at
   least EEA-wide in scope.[16] The Notifying Party supports the Commission's findings.

35) In any event, for the purpose of the present transaction, the exact product and geographic market definition of polyethylene polyolefins  can
   be left open, since the transaction does not raise competition concerns irrespective of the market definition.

        Competitive assessment

1 Adhesives and sealants

36) The parties’ activities overlap in the production of  adhesives  and  sealants  for  the  industry  for  applications  in  the  shipbuilding,
   construction, railways and the automotive industries as well as in the production of adhesives for bonding industrial carpets. At maximum  the
   parties’ combined market share amounts to [5-10]% in industrial adhesives for construction at the EEA level. The Notifying Party confirms that
   under any plausible market definition the parties’ combined market shares, also if measured at the national level, would not exceed 20%, so no
   affected market[17] arises as regards the market for production of adhesives and sealants and any of its  plausible  segments.  Therefore  the
   Commission considers that the transaction does not give rise to competition concerns in this market.

2 Acrylic monomers - GAA

37) Arkema’s share of the EEA market for GAA amounts to [40-50]%, the next largest suppliers include Dow ([20-30]% market share) and  BASF  ([10-
   20]% market share) followed by other smaller suppliers, such as Nippon Shokubai (NSKK) ([0-5]%).

38) The Notifying Party argues that GAA is an insignificant input for the production of adhesives and sealants representing less than  [0-5]%  in
   the production costs of Bostik. The Notifying Party underlines that Arkema’s sales to Bostik represent less  than  [0-5]%  of  Arkema’s  total
   sales of GAA in the EEA (worth EUR […] out of EUR […] of total sales of GAA by Arkema in the EEA), so Arkema could not afford to supply GAA to
   Bostik only and reduce its sales to Bostik’s competitors. Furthermore, it is noted that Arkema faces strong competition from well-known market
   players (BASF, Dow, Evonik etc.), that all GAA customers multisource and systematically have the possibility to buy from the spot market.

39) Additionally, it is noted that GAA is not used directly to produce adhesives, but to prepare  an  intermediate  product,  acrylic  dispersion
   polymer, which is then transformed into an adhesive. Thus, the competitors of Bostik could purchase the intermediate product and cope with  no
   supply of GAA, which reduces significantly Arkema’s market power related to GAA.

40) Finally, the market investigation indicated that GAA is a commodity product and that switching will remain a possibility post-transaction.

41) In view of the above arguments the Commission considers that Arkema would have neither the ability nor the incentive to foreclose  access  to
   the supply of GAA, and thus the Commission considers that the transaction does not give rise to competition concerns in the market of GAA.

3 Acrylate esters - 2EHA

42) As regards the supply of 2EHA in the EEA Arkema’s market share amounts to [30-40]% and the  next  biggest  supplier  is  BASF  with  [30-40]%
   market share, while Dow and NSKK have each approximately [5-10]% market share.

43) The Notifying Party underlines that 2EHA is not an important input in the production of adhesives and sealants as it represents less than [0-
   5]% of the total costs of Bostik. In 2013 Arkema sold to Bostik 2EHA for only EUR […], while the total sales of  2EHA  by  Arkema  were  worth
   around EUR […]. The Notifying Party indicates that there are other big suppliers of 2EHA other than Arkema: BASF, Dow, Momentis, or LG or NSKK
   from Asia, who are able to supply 2EHA offering similar quality and price to Arkema. It is  also  noted  that  2EHA  (together  with  GAA,  as
   explained above) is not used directly to produce adhesives, but to produce acrylic dispersion polymer, an intermediate product which  is  then
   transformed into an adhesive. Thus, if needed, the competitors of Bostik could purchase the intermediate product and cope with  no  supply  of
   2EHA.

44) Finally, the contacted customers active in the production of adhesives and sealants confirmed that 2EHA is a commodity product and that post-
   transaction switching will remain a possibility.

45) In view of the above arguments the Commission considers that Arkema would have neither the ability nor the incentive to foreclose  access  to
   the supply of 2EHA, and thus the Commission considers that the transaction does not give rise to competition concerns in the market of 2EHA.

4 Dicarboxylic acids

46) In aliphatic dicarboxylic acids the market share of Arkema in the EEA does not exceed [5-10]%.  An  affected  market  in  dicarboxylic  acids
   arises only if the market is segmented according to the type of diacid so that the sebacic acid produced by Arkema is considered as a distinct
   product market. In that case Arkema’s market share in the EEA amounts to [40-50]% and it is followed by the  Asian  producers:  Jinghua  ([20-
   30]%), Siqiang (10-20]%), Jiangsu Zhongzheng ([10-20]%) and others.

47) The Notifying Party underlines that the sebacic acid is not an important input in the production of adhesives and sealants as  it  represents
   less than [0-5]% of the total costs of Bostik; it is only one of many components used in the formulation of polyester products, which in  turn
   form only part of Bostik’s portfolio.

48) More importantly, production of adhesives is a marginal end-application of sebacic acids. Arkema’s  sales  of  the  sebacic  acid  to  Bostik
   represent only [0-5]% of Arkema’s total sales of sebacic acid in the EEA and more than [50-60]% of Arkema’s sales of sebacic acid is sold  via
   distributors and traders. Finally, the Notifying Party notices that nowadays the available production capacity for sebacic acid is  more  than
   twice the market demand.

49) In view of the above arguments the Commission considers that Arkema would not be able to foreclose access to the supply of sebacic acid,  and
   thus the Commission considers that the transaction does not give rise to competition concerns in the market of sebacic acid.

5 Rheological additives

50) As regards all the rheological additives for non-aqueous applications, in line with the market definition proposed by  the  Notifying  Party,
   Arkema’s markets share is below [5-10]% in the EEA. If, however, the market for rheological  additives  is  segmented  according  to  chemical
   composition of the additive, an affected market arises in the rheological additives for non-aqueous applications based on polyamide powders in
   the EEA, where Arkema has a market share of [50-60]%.

51) The Notifying Party underlines that the rheological additives, and in particular  those  for  non-aqueous  applications  based  on  polyamide
   powders are not an important input for the production of adhesives and sealants. The main customers of these rheological additives  are  paint
   and sealants producers such as AkzoNobel, PPG, Sherwin Williams, Henkel, 3M etc., while the producers of adhesives and sealants purchase  only
   a small fraction of Arkema’s sales. Furthermore, Arkema  would  not  be  able  to  foreclose  Bostik’s  competitors  from  this  input,  since
   approximately [20-30]% of Arkema’s sales are done through third party distribution. Finally, the Notifying Party argues that  there  are  many
   suppliers such as Elementis, Lehman & Voss, Byk, Kusumoto Chemicals, Troy Corp etc. all of which have similar  overlapping  product  offerings
   that can easily substitute Arkema’s offer both in terms of price and quality.

52) Furthermore, as regards the downstream  market,  Bostik  uses  the  rheological  additives  to  produce  elastic  adhesives  mainly  for  the
   transportation segment within the industrial adhesives (e.g. for windscreen bonding, or glass, metal and composite panel bonding or sealing in
   rail and coach-building industries), which is not at the core of its business strategy. In 2014 Bostik's total sales of  these  adhesives  did
   not exceed EUR […], and Bostik’s market shares in this segment was below [0-5]%, while other competitors, such as Henkel, Sika,  and  Dow  had
   much stronger positions. Therefore, even if Arkema were able to restrict Bostik’s competitors’ access to  its  rheological  additives,  it  is
   highly unlikely that the downstream activity of Bostik could benefit from such foreclosure and make up for the profits lost  in  the  upstream
   market of Arkema.

53) Based on the above, the Commission considers that Arkema would have neither the ability nor the incentive to foreclose access to  rheological
   additives for non-aqueous applications based on polyamide powders, and thus, the transaction does not give rise  to  competition  concerns  in
   this market.

6 Polyethylene polyolefins

54) The Notifying Party confirms that if LDPE is considered the relevant market for its products, Arkema’s market  share  in  the  EEA  does  not
   exceed [0-5]%.

55) If the LDPE market is further segmented according to the manufacturing process, as suggested by the Notifying Party,  Arkema’s  market  share
   in the EEA in the market of acid copolymers amounts to [10-20]% and in the market for ethylene acrylate copolymers to [10-20]%.  Consequently,
   none of these two markets is affected and thus, the transaction does not raise competition concerns in this respect.

56) An affected market would, however, arise in the market of epoxide ethylene copolymers, where Arkema’s market share, with its product  Lotader
   GMA, amounts to [50-60]%. The remaining [50-60]% of epoxide ethylene copolymers in the EEA is supplied by  DuPont.  Among  Arkema’s  customers
   only two are producers of adhesives and sealants: Sika and L&L and both purchase Lotader GMA  for  the  production  of  automotive  foams  and
   adhesives. Bostik also produces some automotive adhesives, but not based on Lotader GMA, and in any event it has an insignificant market share
   in this segment of around [0-5]%, while according to the Notifying Party the largest players include Dow, Sika and Henkel, with each  a  share
   of at least [10-20]% of the market segment.

57) Finally, the Notifying Party notes that for Arkema it would make no sense to reduce its sales of Lotader GMA to the  producers  of  adhesives
   and sealants other than Bostik, because they buy much larger quantities than Bostik.

58) In view of the above facts, the Commission considers that Arkema would have no  incentive  to  foreclose  the  supply  of  Lotader  GMA  from
   Bostik’s competitors and thus the transaction does not raise competition concern in the market of LDPE or any of its segments,  in  particular
   in the epoxide ethylene copolymers.

       5.   CONCLUSION

59) 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

-----------------------
[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]   Publication in the Official Journal of the European Union No C 457, 19.12.2014, p. 21.

[4]   Turnover calculated in accordance with Article 5 of the Merger Regulation and the Commission Consolidated Jurisdictional  Notice  (OJ  C95,
      16.04.2008, p1).
[5]   COMP M.3612 Henkel / Sovereign, recital 10-19, COMP M.4941 Henkel/ Adhesives & Electronic Business, recitals 11-13.

[6]   COMP M.3612 Henkel / Sovereign, recital 38, COMP M.4941 Henkel/ Adhesives & Electronic Business, recitals 41-42, 56.

[7]   COMP 5424 Dow / Rohm and Haas, recital 20, COMP M.6178 Arkema / Total’s Resin Business recital 35.

[8]   COMP M.5424 Dow / Rohm and Haas, recital 22, COMP M.6178 Arkema / Total’s Resin Business recital 37-38.
[9]   COMP M.5424 Dow / Rohm and Haas, recital 36, 47, 57 and 67.

[10]  COMP M.5424 Dow / Rohm and Haas, recital 38.

[11]  COMP M.5424 Dow / Rohm and Haas, recital 220.

[12]        COMP M.5424 Dow / Rohm and Haas, recital 222.

[13]  COMP M.1671, Dow Chemical / Union Carbide, recital 23, COMP Case No IV/M.550 Union Carbide / Enichem, recitals  27  to  35;  COMP  Case  No
      IV/M.1041 BASF / Shell, recitals 32 to 34; COMP Case No IV/M.1163 Borealis / IPIC / OMV / PCD, recital 14.

[14]  COMP M.1671 Dow Chemical / Union Carbide recital , COMP M.4744 INEOS/Borealis recital 12.

[15]  IV M.550 Union Carbide / Enichem recital 34 and 35.

[16]        COMP M.1671, Dow Chemical / Union Carbide, recitals 46 to 48, COMP Case No IV/M.550 Union Carbide /  Enichem,  recitals  48  and  49;
      COMP Case No IV/M.1041 BASF / Shell, recital 37; COMP Case No IV/M.1163 Borealis / IPIC / OMV / PCD, recital 16.
[17]  The Commission considers the market to be horizontally affected when two or more of  the  parties  to  the  concentration  are  engaged  in
      business activities in the same relevant market and where the concentration will lead to a combined market share of 20% or more. See,  e.g.
      Annex 1 to Commission Regulation (EC) No 802/2004 of 21 April 2004 implementing Council Regulation (EC)  No  139/2004  on  the  control  of
      concentrations between undertakings (‘Implementing Regulation’), as amended.  The Commission considers the market to be vertically affected
      when one or more of the parties to the concentration are engaged in business  activities  in  a  relevant  market,  which  is  upstream  or
      downstream of a relevant market in which any other party to the concentration is engaged, and any of their individual  or  combined  market
      shares at either level is 30% or more, regardless of whether there is or is not any existing  supplier/customer  relationship  between  the
      parties to the concentration. See, e.g. Annex 1 to the Implementing Regulation.

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                                                                  PUBLIC VERSION

 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.

                                                                 MERGER PROCEDURE