CELEX: 31995M0678
Language: en
Date: 1995-12-22 00:00:00
Title: COMMISSION DECISION of 22/12/1995 declaring a concentration to be compatible with the common market (Case No IV/M.678 - Minorco / Tilcon) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31995M0678

COMMISSION DECISION of 22/12/1995 declaring a concentration to be compatible with the common market (Case No IV/M.678 - Minorco / Tilcon) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 024 , 30/01/1996 P. 0007

 COMMISSION  DECISION of 22/12/1995 declaring a concentration to be compatible with the common market (Case No IV/M.678  - Minorco  / Tilcon) 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 PARTY Dear Sirs, Subject :  Case No IV/M.678  MINORCO/TILCON <ind>  <ind> Notification of 28.11.1995  pursuant to Article 4 of Council Regulation No 4064/89 1.<ind>  On  28 November 1995, Minorco notified  a  proposed concentration by which Minorco will acquire sole control  of Tilcon Holdings Limited (Tilcon). 2.<ind> After examination of the notification the Commission has  concluded that the proposed operation falls within  the scope  of  Council Regulation No 4064/89 and does not  raise serious  doubts  as  to its compatibility  with  the  common market and the EEA agreement. I. THE PARTIES  3.<ind> Minorco is an international natural resources  group with   its   principal  interests  in  gold,  base   metals, industrial  minerals, paper and packaging and  agribusiness. Minorco's  ultimate parent is Anglo American Corporation  of South   Africa   Limited  (AAC)  which  is  essentially   an investment holding company. 4.<ind>  Tilcon is a UKbased company involved in the  supply of  quarry  products,  concrete and mortar,  and  industrial minerals. II. THE OPERATION 5.<ind>  The  concentration  involves  the  acquisition   by Minorco  of sole control of Tilcon and its subsidiaries  and associated companies by way of a private acquisition. III. COMMUNITY DIMENSION 6.<ind>  The combined worldwide turnover of AAC  and  Tilcon exceeds  5.000  million  ECU. Each party  has  an  aggregate Communitywide  turnover exceeding 250 million ECU.  Although Tilcon  achieves  nearly all of its aggregate  Communitywide turnover  in  the  UK,  AAC  does  not   achieve  more  than twothirds  of its Communitywide turnover in a single  Member State. The operation thus has a Community dimension. IV. COMPATIBILITY WITH THE COMMON MARKET A. Relevant product market 7.<ind>  There  are overlaps in the following  markets:  (i) quicklime,   (ii)   crushed  rock  aggregates,   (iii)   PSV aggregates, (iv) coated stone. (i) Quicklime  8.<ind> Quicklime is produced  by heating limestone to  high temperatures  in a kiln. The quicklime produced  from  these kilns  is  in  the form of lumps which are then crushed  and screened   (screened  quicklime)  in  various  sizes.   Most quicklime  is  used in this screened form but some  screened quicklime  is  further  reduced in  size  in  mills  (ground quicklime) and some is produced as hydrated quicklime (water added to screened quicklime in a controlled  process).  9.<ind>  Although quicklime is supplied in different  forms, the  basic  requirement is the provision  of  calcium  oxide (lime)  for  use  in a chemical process.  The  products  are mainly  used  for steel, sugar and chemical manufacture  but also,  inter  alia, used for effluent and sewage  treatment, water   purification   and   soil  stabilisation.   Screened quicklime  and  ground  quicklime  are  the  same   chemical product,  the only difference being the finer form in  which ground   quicklime  is  supplied.  Hydrated   quicklime   is chemically  different from the other two forms only  in  the sense that water has been added.   10.<ind> As the least processed of the three quicklime forms screened  quicklime is the cheapest product and   most  used product  (in  the  UK  approximately 80%  of  all  quicklime (captive  and  noncaptive) used is screened quicklime  while ground  and  hydrated  quicklime account  for  7%  and  13%, respectively).  11.<ind>  The  three  forms of quicklime  are  all  entirely suitable  for  almost any of the uses to which quicklime  is put  (the  principal exception being steel  manufacture  for which  hydrated quicklime is not suitable). The actual  form in  which  a  customer  chooses  to  purchase  quicklime  is determined  by the particular equipment it may  have  within its  process for handling the quicklime product and to  some extent  by manageability. However, should a customer  choose to  change  its purchase from, for example, ground quicklime to  screened  quicklime it would have to make a modification to  its  processing equipment to enable  it  to  handle  the screened quicklime. The parties estimate the cost of this to be  in  the range of £20.000 to £50.000 depending  on  plant circumstances and capacity. According to the parties,  there are many examples of similar processes using different forms of quicklime for the same purpose and it is not unusual that customers switch from one form to another. 12.<ind> According to the parties, there is a high degree of supply side substitutability between the different forms  of quicklime   since  once  a  company  makes   the   necessary investment  to  enter  the market as  supplier  of  screened quicklime, it is a comparatively small further investment to provide  facilities  for  grinding  (ground  quicklime)  and hydrating.  It  appears  that the  costs  of  each  of  such facilities   to  grind and hydrate  13%  and  19%  of  total output  of screened quicklime, respectively (these  are  the average  noncaptive proportions in the  UK),  amount  to  an increase  of 5% on the initial capital investment.  All  the main  noncaptive manufacturers in the UK produce  all  three forms of quicklime.  13.<ind>   Considering  the  high  degree  of  demand   side substitutability and the relatively small further investment needed   to  extend  production  into  ground  and  hydrated quicklime the three forms of quicklime can be considered  as one market. (ii)  Crushed rock aggregates,(iii) PSV aggregates and  (iv) coated stone   14.<ind> Minorco and Tilcon produce crushed rock aggregates, PSV aggregates and coated stone.  15.<ind>  Crushed rock aggregates are used mainly  for  road building  and  maintenance  of  roads.  PSV  aggregates  are aggregates  with  a high degree of skid resistance  and  are accordingly  used  on  the top layer  of  road  surfaces  to prevent vehicles from skidding. Coated stone is crushed  and screened  aggregates coated with bitumen and is  used  inthe construction and maintenance of roads. 16.<ind>  According  to  the  parties,  each  of  the  three products   (a) crushed rock aggregates, (b) PSV  aggregates, (c)  coated stone  should be considered as separate  product markets  because of different end uses. In this case,  these narrow  market definitions will be used. If the  transaction does not give rise to competition problems at these narrowly defined  levels, in this case  there will be no  significant competitive impact on the EEA area.    B. Geographic markets (i) Quicklime  17.<ind>  All  the main UKbased noncaptive producers  market their  products  on  a  national  basis.  According  to  the parties, the transport costs as a proportion of total  costs are around 20% which are sufficiently low to allow producers to  compete  nationally. Moreover, four of  the  five  major noncaptive  producers in the UK are based at locations  with limestone deposits which are relatively close to each  other so that none is at a disadvantage competing for the national market.  18.<ind>  Import of the products into the UK is  very  small (approximately  0.5%  of total UK consumption  and  1.0%  of noncaptive consumption).   19.<ind>  On  the  basis  of  the  information  above,   the geographic market for quicklime can be considered to be  the UK. (ii) Crushed rock aggregates 20.<ind> The main sales of crushed rock aggregates  tend  to be   around  the  major  conurbations  or  growth  areas  of population,  in  which  areas  there  is  significant   road building  and maintenance activity. Therefore, according  to the  parties, the geographical market definition of  crushed rock  aggregates should be confined by such  economic  areas rather  than  by the distance of transport. In this  respect the  parties  define an area (West Midlands  EPR  (excluding Staffordshire)   plus   the   counties    of    Powys    and Gloucestershire)  as  the  natural  geographic  market   for crushed   rock  stone  produced  by  Minorco   and   Tilcon. Considering the locations of Minorco and Tilcon's  quarries, this would mean a distance of up to 100 km from the quarry. 21.<ind>  However, it appears that the typical distance  for sales of crushed rock aggregates  would be some 55km to 70km from  the  quarry,  although of  course  some  crushed  rock aggregates  are  transported beyond this  distance.  Such  a typical  distance  is  a  result of  a  combination  of  the relatively  high  transport costs as  a  proportion  of  the delivered price of the products (45% to 55% at the  distance of  55  km  to 70 km) and the fairly widespread location  of quarries producing this type of aggregate.  22.<ind>  The  relevant geographic market for  crushed  rock aggregates appears to be within a distance of between 55  km and  100  km from the quarry. It is not necessary to further delineate the relevant geographic market because neither  in any  narrow market ( 55km from the quarry), nor in any wider market  (i.g.  the  UK), is there a significant  competitive impact on the EEA area.  (iii) PSV aggregates  23.<ind>  PSV  aggregates are marketed at a  national  level since  this  type of aggregate is supplied from a relatively limited  number of locations and the transport costs  (as  a proportion  of  price)  is lower compared  to  crushed  rock aggregates.  According to the parties, currently  they  sell PSV  aggregates  throughout the UK.  Thus, the  geographical scope of PSV aggregates can be considered national.  (iv) coated stone 24.<ind>  Coated  stone  is  a  hot  product  delivered   in insulated  vehicles as soon as it has been manufactured.  It has to be used within some two to three hours of manufacture to  prevent it from cooling and hardening to such an  extent that it would be difficult to lay. The parties estimate  the typical geographic market for coated stone to be up to  some 65  km  to  100  km from the coating plant, at  which  range transport costs would account for an estimated 20% to 25% of the delivered selling price.  25.<ind> Considering the characteristics of the product,  it appears that the relevant geographic market for coated stone does  not exceed a radius of 100 km from the coating  plant. It  is  not  necessary  to  further delineate  the  relevant geographic market because neither  in any  narrow geographic market  (65  km from the coating plant), nor  in  any  wider market    (i.g.   the   UK),    is   there   a   significant competitiveimpact on the EEA area.  C. Assessment of the operation (i) Quicklime 26.<ind>  The total consumption of quicklime in  the  UK  in 1994  amounted  to  2,672,000 tons of which  1,472,000  tons (approximately  55%)  was noncaptive.  The  largest  captive producers are Brunner Mond, British Steel and British Sugar.  27.<ind>  Currently,  Minorco is the  major  player  on  the noncaptive UK market for quicklime with  a share of [deleted business  secret : between 20 and 40 %] while  Tilcon  is  a minor  player  with a share of [ less than 5 %].  Thus,  the parties' combined shares in 1994 amount to [between  20  and 40 %]. 28.<ind>  However,  several  other  companies  have   strong positions: Redland Minerals Ltd and Singleton Birch Ltd with shares  of  around 20% and ARC Southern and  RMC  Industrial Minerals Ltd with shares between 7% and 12%.  29.<ind>  The  parties  are  not particular  strong  on  the upstream market for limestone. In 1994 the UK production  of limestone  suitable  for  quicklime production  amounted  to approximately  55  million tons of  which  Minorco  produced about 4 million tons and Tilcon 3,5 million tons. Thus,  the parties combined share of this market is less than 14%. 30.<ind>   According   to  the  parties,   British   Steel's considerable purchasing power as the largest customer in the marketplace  should be taken into account. In  1994  British Steel's  own  captive production amounted  to  approximately 450.000  tons  but in the same year British Steel  purchased from  other producers approximately 690.000 tons, or 47%  of all quicklime sold by noncaptive producers. It follows, that significant changes in British Steel's demand for  quicklime would have large effects on the noncaptive market.  31.<ind>  In  conclusion, although Minorco has a substantial market  share  this will only marginally be increased  as  a result  of  the acquisition. Furthermore, the  parties  will face  competition from several large competitors.  Thus,  on the UK market for quicklime the concentration does not raise serious  doubts  as  to its compatibility  with  the  common market.  (ii) Hard rock aggregates 32.<ind>  Considering  a  very wide geographic  market,  for example   the  UK,  the  parties' combined  share  of  total production would be approximately 7%. 33.<ind> In the UK Minorco only produce hard rock aggregates from one quarry (called "Nash"), which is situated in Powys, Wales.  Considering  that  the  geographic  scope  of  these products  is a distance of 100 km from the quarry, different degrees  of  overlap between Minorco's quarry  and  Tilcon's four  quarries  can be identified. One of Tilcon's  quarries (called "Gore") is placed very near Minorco's Nash quarry in Powys.  The  distance  from the Nash and  Gore  quarries  to Tilcon's other three quarries is between 100 km and 130  km.  34.<ind>  In  an area formed by a circle with  a  radius  of 100km  with  its  centre  at  the  Nash  and  Gore  quarries approximately 50 quarries produce hard rock aggregates.  The parties  estimate their combined market share of  the  total production inside this area to be about 15%.     35.<ind> In a very narrow geographic market, for example  an area  formed  by  a circle with a radius of  50km  with  its centre  at  the  Nash  and Gore quarries,  approximately  30 quarries  produce hard rock aggregates. The parties estimate their  combined share of the total production of  hard  rock aggregates inside this area to be about 20%.   36.<ind>   However,  the  number  of  actual  or   potential competitors are of course higher than the number of quarries located inside the areas since many  producers of hard  rock aggregates  outside the circle supply or could  supply  this product into different parts of the area in the circle.  37.<ind>  In  conclusion, on this market  the  concentration does  not raise serious doubts as to its compatibility  with the  common  market  since neither in any narrow  geographic market  nor in any wider geographic market will the parties' combined share of total production exceed approximately  20% and,  furthermore,  there is a large number  of  actual  and potential competitors.    (iii) PSV aggregates 38.<ind>  Since  the parties combined share of  this  market will   not   exceed   9%,  on  this  market   the   proposed concentration  does  not  raiseserious  doubts  as  to   its compatibility with the common market.  (iv) coated stone 39.<ind>  Considering  a  very wide geographic  market,  for example   the  UK,  the partie's combined   share  of  total production would be approximately 5%. 40.<ind> In the UK Minorco only produces coated stone from a plant  at its Nash quarry (see above). Considering that  the geographic scope of these products is a distance of  100  km from  the  coating  plant  there are  different  degrees  of overlap  between  Minorco's plant and five plants  owned  by Tilcon.  One of these plants is the Gore plant (see  above). Another  is  located about 60 km from the  Nash/Gore  plants while  the remaining three plants are located at a  distance of between 100 km and 130 km from the Nash/Gore plants.  41.<ind>  In  an area formed by a circle with  a  radius  of 100km  with  its  centre  at  the Nash/Gore  coating  plants approximately 25 coating plants produce coated  stone.   The parties   estimate  their  combined   share  of  the   total production inside this area to be less than 15%.    42.<ind> In a very narrow geographic market, for example  an area  formed  by  a circle with a radius of  65km  with  its centre  at  the Nash/Gore plants, approximately  15  coating plants  produce  coated  stone. The parties  estimate  their combined  market share of the total production  inside  this area to be about 25%.   43.<ind>  As  in  the  case of crushed rock  aggregates  the number  of  actual  or potential competitors  are  of  cause higher  than the number of plants located inside  the  areas since  many   producers of coated stone outside the   circle supply or could supply this product into different parts  of the area in the circle.  44.<ind>  In  conclusion, on this market  the  concentration does  not raise serious doubts as to its compatibility  with the  common  market  since neither in any narrow  geographic market  nor in any wider geographic market will the parties' combined  share  exceed approximately 25% and,  furthermore, there   is   a   large  number  of  actual   and   potential competitors. <ind> V. CONCLUSION 45.<ind>  It  follows  from  the  above  that  the  proposed concentration  would  not create or  strengthen  a  dominant position   as  a  result  of  which  competition  would   be significantly  impeded  in  the  common  market  or   in   a substantial part of it. <ind> VI. ANCILLARY RESTRICTIONS 46.<ind>  Tilcon has undertaken a noncompetition  obligation in the UK in relation to the activities currently carried on by  Tilcon.  The period of the obligation is 30 months  from completion.   Furthermore,  under  the  Sale  and   Purchase Agreement the parties have accepted restrictions on the  use of  certain names, marks and logo. These provisions  can  be considered  ancillary  to  the  concentration  because  they appear   to  be  directly  related  and  necessary  to   the operation. <ind> For the above reasons, the Commission has decided  not to   oppose  the  notified  operation  and  to  declare   it compatible  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,