CELEX: 32013M6962
Language: en
Date: 2013-12-19 00:00:00
Title: Commission Decision of 19/12/2013 declaring a concentration to be compatible with the common market (Case No COMP/M.6962 - RENOVA INDUSTRIES / SCHMOLZ & BICKENBACH) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

                                        Brussels, 19.12.2013
                                        C(2013)9778 final

|In the published version of this decision, some information|           |Public version                                                |
|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|information omitted has been replaced by ranges of figures |           |                                                              |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.                                  |           |                                                              |
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|                                                           |           |MERGER PROCEDURE                                              |
|                                                           |           |ARTICLE 6(1)(b) DECISION                                      |

|                                                                       |To the notifying party:                                                |

Dear Sir/Madam,

Subject:    Case No COMP/M.6962 – RENOVA INDUSTRIES / SCHMOLZ & BICKENBACH
         Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1]

1. On 19 November 2013, the European Commission received a notification of a  proposed  concentration  pursuant  to  Article  4  of  the  Merger
   Regulation, by which the undertaking Renova Industries Ltd. ('Renova',  Bahamas)  intends  to  acquire,  through  its  wholly-owned  indirect
   subsidiary Venetos Holding AG ('Venetos'), sole control within the meaning of Article 3(1)(b) of the Merger  Regulation  of  the  undertaking
   Schmolz + Bickenbach AG ('S+B', Switzerland) by way of a shareholders' agreement. Renova is hereinafter referred to as the 'Notifying  Party'
   while Renova and S+B together are referred to as the 'Parties'.

 1. THE PARTIES

2. Renova is a private business group that consists of asset management companies and direct  portfolio  investment  funds  owning  and  managing
   assets in metals, mining, machine  building,  construction  development,  energy,  telecommunications,  nanotechnologies,  utilities  and  the
   financial sector in Russia, Europe, South Africa, and the US.

3. S+B is active in the manufacturing, processing and distribution of steel  long  products,  including  stainless  steel  and  tool  steel  long
   products.

 2. THE TRANSACTION AND CONCENTRATION

4. Renova, through its wholly-owned indirect subsidiary Venetos, has acquired a total of 25.51% of shares in S+B through a purchase of 25.29%  of
   shares in S+B from Schmolz + Bickenbach GmbH & Co. KG ('S+B KG') and through a mandatory tender offer required by the Swiss takeover law.  S+B
   KG has retained 15.17% of shares in S+B.

5. On 28 June 2013, Venetos and S+B KG entered into a shareholders' agreement that is intended to become effective  following  the  reception  of
   merger control approvals. […].

6. Therefore, Renova intends to control 40.68% of shares in S+B due to the shareholders' agreement. Since the shareholders'  meetings  have  been
   attended by shareholders representing a maximum of 63.4% of votes during the past three years, Renova would acquire de facto control of S+B by
   virtue of the shareholders' agreement.

7. In view of the above, the proposed transaction constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

 3. EU DIMENSION

8. The undertakings concerned have a combined aggregate world-wide turnover of more than  EUR  5  000  million  (Renova:  […];  S+B:  EUR  3  581
   million). Both undertakings have an EU-wide turnover in excess of EUR 250 million (Renova: […]; S+B: […]), but they do not achieve  more  than
   two-thirds of their aggregate EU-wide turnover within one and the same Member State. The proposed transaction therefore has  an  EU  dimension
   pursuant to Article 1(2) of the Merger Regulation.

 4. COMPETITIVE ASSESSMENT

9. The proposed transaction does not give rise to any horizontal overlaps between the Parties' activities.

10. However, the proposed transaction gives rise to vertically affected  markets  with  respect  to  (i)  the  Notifying  Party's  production  of
   silicomanganese upstream and S+B's production of  stainless  steel  long  products  downstream;  (ii)  the  Notifying  Party's  production  of
   silicomanganese upstream and S+B's production of tool steel long products downstream, and (iii)  S+B's  production  of  stainless  steel  long
   products upstream and the Notifying Party's production of industrial pumps downstream.[2]

      1. Relevant product markets

           1. Stainless steel long products and tool steel long products (stainless bright bars and hot-work tool steel)

11. In previous decisions, the Commission has distinguished steel products  based  on  the  chemical  composition  of  the  steel  (metallurgical
   characteristics) on the one hand and according to the physical shape of the product on the other.

12. Based on chemical composition, the Commission has distinguished three broad categories of steel products: (i) carbon  steel,  (ii)  stainless
   steel and (iii) specialty steels (highly alloyed steel and electrical steel).[3]

13. Carbon steel is carbon-based steel containing no or very little amounts of alloying elements.

14. Stainless steel is defined as steel containing 10.5% or more of chromium and less than 1.2% of carbon.

15. Specialty steels are characterised by their high levels of purity, are generally more expensive than  other  steel  products  and  have  been
   designed for specific purposes. Specialty steels can be further divided into (i) engineering steel, (ii)  high  speed  steel  and  (iii)  tool
   steel. In addition, the Commission has also considered distinguishing among tool steel products between (i) cold-work  steels,  (ii)  hot-work
   steels and (iii) plastic mould steels.[4]

16. As to the physical shape, the Commission has held that long steel products constitute a distinct relevant product market, separate from  flat
   products.[5] In addition, the Commission has considered potential segmentations of long steel products between (i) ingots  and  billets,  (ii)
   wire rod, (iii) hot rolled and forged bars, (iv) bright bars and (v) drawn wire.[6]

17. The Notifying Party generally agrees with the Commission's practice, albeit notes that certain steel products  may  not  easily  fit  into  a
   single category.

18. The proposed transaction only gives rise to vertical relationships with  respect  to  stainless  bright  bars,  a  potential  sub-segment  of
   stainless steel long products, and hot-work tool steel, a potential sub-segment of tool steel long  products.  Hence,  other  types  of  steel
   products will not be considered further in this decision.

19. For the purposes of this decision, however, the exact product market definition can be left open as the proposed transaction does  not  raise
   serious doubts as to its compatibility with the internal market under any alternative product market definition.

           2. Silicomanganese

20. Silicomanganese (SiMn) is a ferroalloy that is produced from manganese ore and is used in steel production  in  order  to  confer  particular
   metallurgical and mechanical characteristics to the final product, such as hardening.

21. The Commission has previously left open whether the production and supply of silicomanganese constitutes a distinct relevant  product  market
   or whether it is part of a wider market consisting of all manganese ferroalloys.[7]

22. For the purposes of this decision, the exact product market definition can be left open as the proposed transaction does  not  raise  serious
   doubts as to its compatibility with the internal market under any alternative product market definition.

           3. Centrifugal industrial pumps

23. Industrial pumps are used for the transportation of liquid or semi-liquid substances within a given system. The Commission has in a  previous
   decision considered whether industrial pumps could be distinguished according to the technical concept employed into (i)  reciprocating  pumps
   and (ii) centrifugal pumps, leaving the market definition eventually open.[8] The Notifying Party is active in centrifugal pumps, through  its
   control over Sulzer, but not in reciprocating pumps. S+B is not active in industrial pumps.

24. For the purposes of this decision, the exact product market definition can be left open as the proposed transaction does  not  raise  serious
   doubts as to its compatibility with the internal market under any alternative product market definition.

   2. Relevant geographic markets

        1. Stainless steel long products and tool steel long products (stainless bright bars and hot-work tool steel)

25. In previous decisions, the Commission has considered that the relevant  geographic  market  for  stainless  steel  long  products,  of  which
   stainless bright bars are a potential sub-segment, and tool steel long products, of which hot-work tool steel is a potential  sub-segment,  is
   EEA-wide or at least EEA-wide.[9] The Notifying Party submits that the relevant geographic market is at least EEA-wide.

26. For the purposes of this decision, the exact geographic market definition can be left  open  as  the  proposed  transaction  does  not  raise
   serious doubts as to its compatibility with the internal market under any alternative geographic market definition.

   2. Silicomanganese

27. In a previous decision, the Commission has considered that there are strong indications that the market is global, but  has  ultimately  left
   the question open.[10] The Notifying Party submits that the relevant geographic market is global.

28. For the purposes of this decision, the exact geographic market definition can be left  open  as  the  proposed  transaction  does  not  raise
   serious doubts as to its compatibility with the internal market under any alternative geographic market definition.

   3. Centrifugal industrial pumps

29. In a previous case, the Commission has considered the market for industrial pumps to be EC-wide.[11] The Notifying  Party  submits  that  the
   relevant geographic market is either EEA-wide or global.

30. For the purposes of this decision, the exact geographic market definition can be left  open  as  the  proposed  transaction  does  not  raise
   serious doubts as to its compatibility with the internal market under any alternative geographic market definition.

      3. Assessment

31. The Notifying Party submits that the vertical relationships are marginal at best and do not give rise to competition concerns.

           1. Silicomanganese and stainless steel long products (stainless bright bars)

32. Silicomanganese and stainless steel long products result in a vertically affected market only if  stainless  bright  bars  are  considered  a
   distinct market, separate from other stainless steel long products. In this potential market, S+B has  a  market  share  of  [20-30]%  in  the
   EEA.[12] Other competitors present in the potential EEA market for stainless  bright  bars  include  Rodacciai  Group  ([10-20]%),  Acciaierie
   Valbruna ([10-20]%) and Acerinox Group ([5-10]%).

33. As to the production and supply of silicomanganese, the Notifying Party's market share is approximately [0-5]% both at the worldwide and EEA-
   level. The total sales of silicomanganese by the Notifying Party to the EEA was approximately […] (and […] worldwide) whereas S+B purchased in
   total […] of silicomanganese.

34. No substantiated concerns were raised during the Commission's market investigation  as  regards  silicomanganese  and  stainless  steel  long
   products. Most respondents to the Commission's market investigation did not foresee any impact on the market  as  a  result  of  the  proposed
   transaction.[13]

35. In view of the minor market share of the notifying Party in silicomanganese at the EEA and global  levels,  and  of  the  presence  of  other
   significant competitors in the potential downstream market for stainless steel bright bars,  any  foreclosure  or  other  competition  concern
   related to the vertical relationship between the Notifying Party's activities in silicomanganese and S+B's activities in stainless steel  long
   products appears unlikely.

36. In view of the above, it is concluded that the proposed transaction does not raise serious doubts as to its compatibility with  the  internal
   market with respect to silicomanganese and stainless steel long products.

           2. Silicomanganese and tool steel long products (hot-work tool steel)

37. Silicomanganese and tool steel long products result in a vertically affected market only if hot-work tool  steel  is  considered  a  distinct
   market, separate from other tool steels. In this potential market, S+B has a market share of [20-30]% in the EEA. Other competitors present in
   this potential market include Voestalpine Edelstahl ([20-30]%), Kind & Co. Edelstahlwerke ([5-10]%) and Metal Ravne ([5-10]%).[14]

38. As mentioned in paragraph 33 above, the Notifying Party's market share in the production and supply of silicomanganese is  approximately  [0-
   5]% both at the worldwide and EEA-level. The total sales of silicomanganese by the Notifying Party in the EEA was approximately […]  (and  […]
   worldwide) whereas S+B purchased in total […] tonnes of silicomanganese.

39. No substantiated concerns were raised during the Commission's market investigation as regards silicomanganese and tool steel  long  products.
   Most respondents to the Commission's  market  investigation  did  not  foresee  any  impact  on  the  market  as  a  result  of  the  proposed
   transaction.[15]

40. In view of the minor market share of the notifying Party in silicomanganese at the EEA and global  levels,  and  of  the  presence  of  other
   significant competitors in the potential downstream market for hot-work tool steels, any foreclosure or other competition concern  related  to
   the vertical relationship between the Notifying Party's activities in silicomanganese and S+B's activities in tool steel long products appears
   unlikely.

41. In view of the above, it is concluded that the proposed transaction does not raise serious doubts as to its compatibility with  the  internal
   market with respect to silicomanganese and tool steel long products.

           3. Stainless steel long products and centrifugal industrial pumps

42. Stainless steel long products and centrifugal industrial pumps result in a vertically affected market  only  if  stainless  bright  bars  are
   considered a distinct market, separate from other stainless steel long products. In this potential market, S+B has a market share of  [20-30]%
   in the EEA. As mentioned above, other competitors present in this potential market include Rodacciai  Group  ([10-20]%),  Acciaierie  Valbruna
   ([10-20]%) and Acerinox Group ([5-10]%).

43. The Notifying Party's activities in the production of centrifugal industrial pumps stem from its control over Sulzer, which  enjoys  an  EEA-
   wide market share of approximately [10-20]% and a worldwide market share of approximately [5-10]%. According to the Notifying Party,  the  top
   five worldwide producers, of which Sulzer is number four, account for slightly less than half of the total market.

44. No substantiated concerns were raised during the Commission's market investigation as regards stainless steel long products  and  centrifugal
   industrial pumps. Most respondents to the Commission's market investigation did not foresee any impact on  the  market  as  a  result  of  the
   proposed transaction.[16]

45. In view of the limited presence of the notifying Party in centrifugal industrial pumps and the presence of other significant  competitors  in
   both the potential upstream market for stainless bright bars and the potential downstream markets for  centrifugal  pumps  at  EEA  or  global
   level, foreclosure and any other competition concerns related to the vertical relationship appear unlikely.

46. In view of the above, it is concluded that the proposed transaction does not raise serious doubts as to its compatibility with  the  internal
   market with respect to stainless steel long products and centrifugal industrial pumps.

 5. CONCLUSION

47. 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

-----------------------
[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]   For the sake of completeness, it is noted that S+B sells minimal volumes of long steel  products  to  the  Notifying  Party's  subsidiaries
   active in the production of high speed filament spinning machines, compressor parts, steam turbine parts, gas turbine parts, dies and  gauges
   for measurement.

[3]   COMP/M.6471 – Outokumpu / Inoxum, paragraphs 116–7; COMP/M.5211 – Outokumpu /  Sogepar,  paragraph  10;  COMP/M.3778  –  Böhler-Uddeholm  /
   Buderus, paragraph 11; and COMP/ECSC 1351 – Usinor/Arbed/AcerItalia, paragraph 13.

[4]   COMP/M.3778 – Böhler–Uddeholm / Buderus, paragraph 17.

[5]   COMP/M.6471 – Outokumpu / Inoxum, paragraph 128, and COMP/M.4137 – Mittal / Arcelor, paragraph 17.

[6]   See e.g. COMP/M.4211 – Schmolz + Bickenbach/Ugitech, paragraphs 10–3. See also COMP/M.5211 – Outokumpu/Sogepar.

[7]   COMP/M.5179 – Eramet / Tinfos, paragraph 17. In an earlier decision, the Commission had considered that there was limited  substitutability
   between the various manganese alloys. See COMP/M.2413 – BHP/Billiton, paragraph 22.

[8]   Case No IV/M.121 – Ingersoll-Rand / Dresser, points 12–3. The Commission has also considered in previous cases whether specific pumps  used
   in pulping constitute a relevant products market, but did not define separate product markets for such  pumps.  See  M.4187  –  Metso  /  Aker
   Kvaerner, paragraph 28, footnote 21, and M.1930 – Ahlstrom / Andritz, paragraphs 45–7.

[9]   E.g. COMP/M.4211– Schmolz + Bickenbach / Ugitech, paragraph 16, and COMP/M.3778 – Böhler-Uddeholm / Buderus, paragraphs 35–6.

[10]    COMP/M.5179 – Eramet / Tinfos, paragraph 22.

[11]  IV/M.121 – Ingersoll-Rand / Dresser, point 14.

[12]  All market shares are the Notifying Party's best estimates for 2012.

[13]  See replies to questions 6.1, 6.2, and 7 of the Commission’s request for information pursuant to Article 11 of the Merger Regulation,  sent
   on 21 November 2013.

[14]  The Notifying Party has only been able to provide market shares of competitors for the wider possible market for hot work tool steel,  cold
   work tool steel and plastic mould tool steel combined. The Notifying Party however submits that the shares on the  narrower  possible  segment
   for hot work tool steel would be comparable to these figures.

[15]  See replies to questions 6.4 and 7 of the Commission’s request for information pursuant to Article 11 of the Merger Regulation, sent on  21
   November 2013.

[16]  See replies to questions 6.1, 6.2 and 7 of the Commission’s requests for information pursuant to Article 11 of the Merger Regulation,  sent
   on 21 November 2013.