CELEX: 32015M7711
Language: en
Date: 2015-09-16 00:00:00
Title: Commission Decision of 16/09/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7711 - ADVENT INTERNATIONAL / BAIN CAPITAL / ICBPI) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 16.9.2015
C(2015) 6463 final

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|To the notifying parties:                                              |                                                                       |

Dear Sir/Madam,

Subject:    Case M.7711 - ADVENT INTERNATIONAL/ BAIN CAPITAL/ ICBPI
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 August 2015, the European Commission received notification of a proposed concentration pursuant to Article 4 of the Merger  Regulation
    by which funds managed by Advent International Corporation ("Advent International", USA) and funds managed by Bain Capital Investors, L.L.C.
    ("Bain Capital", USA) acquire within the meaning of Article 3(1)(b) and 3(4) of the Merger Regulation joint control over  Istituto  Centrale
    delle Banche Popolari Italiane S.p.A. ("ICBPI", Italy) by way of purchase of shares.[3]

 2) Advent International and Bain Capital are designated hereinafter as the "Notifying Parties".

       THE PARTIES

 3) ICBPI is a banking group active in Italy in the issuing of  payment  cards,  merchant  acquiring,  terminal  management,  payment  services,
    securities services and regulatory/compliance management services. ICBPI is currently owned by a number of Italian cooperative  banks,  with
    no shareholder exercising control.

 4) Advent International is a private  equity  investor  active  in  various  sectors,  including  industrial,  retail,  media,  communications,
    information technology, internet, healthcare and pharmaceuticals.

 5) Bain Capital is a private equity investment firm that invests  in  companies  across  many  industries,  including  information  technology,
    healthcare, retail and consumer products, communication, financial and industrial/manufacturing.

 6) In addition, Advent International and Bain Capital jointly  control[4]  Worldpay,  a  company  providing  merchant  acquiring  and  acquirer
    processing payment services, and Nets, a company providing payment, card and information services.

 7) Finally, Advent International solely controls Oberthur, a company providing security solutions for payment, identity, telecommunications and
    mobile sectors on a worldwide basis.

       THE OPERATION AND THE CONCENTRATION

 8) On 19 June 2015, Advent International, Bain Capital and Clessidra SGR S.p.A. (“Clessidra”), entered into  a  Sale  and  Purchase  Agreement,
    pursuant to which Advent International and Bain Capital each intend to acquire an indirect interest  of  approximately  36%  of  ICBPI.  The
    remaining 13% of shares will be held by Clessidra and 15% of shares will be held by a number of Italian cooperative banks some of which  are
    current shareholders of ICBPI.

   Joint control

 9) Pursuant to the Equity Term Sheet and the draft Investment and Shareholders’ Agreement (the "SHA"), Advent International  and  Bain  Capital
    will jointly control ICBPI while other shareholders will only have minority rights. Specifically, ICBPI  will  be  managed  by  a  Board  of
    Directors comprised of 13 directors. Advent International and Bain Capital each will be entitled to appoint 4 directors.[5]  Resolutions  of
    the Board of Directors, including all strategic matters such as the adoption of the business plan and the annual budget and the  appointment
    and removal of the chairman, chief executive officer, chief financial officer and other senior managers will be passed by a simple majority,
    which must however include the consent of at least one director appointed by each of Advent International and Bain  Capital.  As  a  result,
    only Advent International and Bain Capital will have a  veto  right  in  respect  of  any  strategic  resolution.  It  follows  that  Advent
    International and Bain Capital will jointly control ICBPI.

   Full-function character

10) Following the Transaction, ICBPI will continue to be active on each of the markets in which it currently operates, and it will  continue  to
    be economically autonomous from its parents from an operational perspective. In particular, ICBPI will have  its  own  dedicated  management
    (including an executive board) and access to sufficient resources. In addition, ICBPI will be independent of the Notifying Parties  for  any
    sales or purchases. Finally, ICBPI will conduct its business on a lasting basis.

11) The Transaction therefore constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

       UNION DIMENSION

12) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million (Advent International: EUR […], Bain
    Capital: EUR […], ICBPI: EUR 664 million). Each of them has an EU-wide turnover in excess of EUR 250 million (Advent International: EUR […],
    Bain Capital: EUR […], ICBPI: EUR 662 million), but they do not achieve more than two-thirds of their aggregate EU-wide turnover within  one
    and the same Member State.

13) The notified operation therefore has an EU dimension pursuant to Article 1(2) of the Merger Regulation.

       ASSESSMENT

1 Product market definition

1 Merchant acquiring services

14) In previous decisions, the Commission has defined a separate market for merchant acquiring services  that  is  distinct  from  payment  card
    processing.[6]  In  addition,  the  Commission  has  envisaged  a  possible  further  segmentation,  based  on:  (i)  payment  card  schemes
    (domestic/international), (ii) payment card brands (Visa, Visa  Electron,  MasterCard,  Maestro  etc.),  (iii)  the  type  of  payment  card
    (credit/debit) and (iv) services for payments through physical POS terminals and web-enabled interfaces (eCommerce).[7]

15) The Notifying Parties submit that the above mentioned sub-segmentation of the product market for  merchant  acquiring  is  not  appropriate,
    because (i) merchants generally want to be able to accept as broad range of payment cards as possible and (ii) merchant acquirers  generally
    offer services for all payment cards and in all cases the fundamental service offered by the merchant acquirer is the same.

16) In any event, for the purpose of this Decision, the exact product market definition for merchant acquiring services can be left open, as the
    Transaction does not give rise to serious doubts as regards its compatibility with the internal market irrespective of  the  precise  market
    definition.

2 Manufacturing and supply of smart payment cards

17) In a previous decision, the Commission considered that manufacturing and supply of smart payment cards to financial institutions  constitute
    a separate market distinct from the overall market for secure plastic cards.[8]

18) The Notifying Parties do not contest the previous assessment of the Commission.

19) In any event, for the purpose of this Decision, the exact product market definition for manufacturing and supply of smart payment cards  can
    be left open as the Transaction does not give rise to serious doubts as regards its compatibility with the internal market  irrespective  of
    the precise market definition.

3 Card issuing

20) The Commission has previously found a separate product  market  for  card  issuing  that  is  distinct  from  merchant  acquiring  and  card
    processing.[9] In addition, the Commission considered a potential sub-segmentation of the market between: (i) debit vs.  credit/charge  card
    issuing, (ii) universal/hybrid store credit cards  vs.  special  purpose  credit  card  issuing,  and  (iii)  personal  vs.  corporate  card
    issuing.[10]

21) The Notifying Parties do not contest the previous assessment of the Commission.

22) In any event, for the purpose of this Decision, the exact product market definition for card issuing can be left  open  as  the  Transaction
    does not give rise to serious doubts as regards its compatibility with the internal market irrespective of the precise market definition.

2 Geographic markets

1 Merchant acquiring services

23) In previous decisions, the Commission found that the geographic market for merchant acquiring, including all  possible  segmentations,  with
    the exception of web-enabled transactions, may be national in scope or is, at most, not wider  than  the  EEA.  In  respect  of  web-enabled
    transactions (merchant acquiring for online merchants), the Commission has considered that this may be EEA-wide but has ultimately left  the
    exact market definition open.[11]

24) The Notifying Parties submit that any hypothetical market for the provision of merchant acquiring for online merchants would be at least EEA-
    wide, if not worldwide.

25) In any event, for the purpose of this Decision, the exact geographic market definition for merchant acquiring services can be left  open  as
    the Transaction does not give rise to serious doubts as regards its compatibility with the  internal  market  irrespective  of  the  precise
    market definition.

2 Manufacturing and supply of smart payment cards

26) In previous decisions, the Commission considered that the manufacturing and supply of smart payment cards is national  in  scope  due  to  a
    general distinction between countries that have adopted standards providing for the use of chips (together with other security features) and
    those that have not.[12]

27) The Notifying Parties submit that the supply of smart payment cards has evolved since the Commission's previous assessment almost  10  years
    ago, as the growing trend towards technological harmonisation is gradually moving the sector towards an EEA-wide or even global  market.  In
    particular, there have been significant advancements in smart card technology, and greater use of EEA-wide standards. Indeed, payment  cards
    in all Member States now incorporate worldwide standardised EMV chips[13] and increasingly are using standardised contactless technology.

28) In any event, for the purpose of this Decision, the exact geographic market definition for manufacturing and supply of smart  payment  cards
    can be left open as the Transaction does not give rise to serious doubts as regards its compatibility with the internal market  irrespective
    of the precise market definition.

3 Card issuing

29) In previous decisions, the Commission considered that the market for card issuing (and any segment therein) is national in scope.[14]

30) The Notifying Parties do not contest the previous assessment of the Commission.

31) In the light of the above, the Commission considers it appropriate to assess the market for card issuing at the national level.

3 Competition assessment

1 Horizontal effects

1 Merchant acquiring services

32) The Transaction gives rise to a horizontally affected market in relation to the provision  of  merchant  acquiring  services  in  Italy.  No
    affected markets arise at the EEA level under any possible product market sub-segmentation.

33) In the EU, ICBPI is active only in Italy (outside the EU, ICBPI is also active in San Marino). It has a customer base largely  comprised  of
    local brick-and-mortar merchants that do not have any significant global online presence.

34) According to the Notifying Parties, […]* is active almost exclusively in the UK and does not target merchants located  outside  the  UK  and
    Ireland.[15] As a result, […]* generates revenues outside the UK and Ireland only where a UK or Irish merchant  has  specifically  requested
    Worldpay to provide a uniform solution across the merchant’s retail platform and online presence, or in a specific  territory.  Furthermore,
    Worldpay has no physical presence or POS terminals in Italy  and  generates  revenues  from  a  small  number  of  primarily  UK  and  Irish
    customers.[16]

35) Similarly, Nets is active mainly in the Nordic region and does not target merchants located in Italy. Consequently, Nets has only negligible
    sales of merchant acquiring services to merchants in Italy, generating net revenue of only around €[…] in 2014  from  only  [description  of
    customers]. Nets has no physical presence or POS terminals in Italy, and has no plans to expand into Italy.

36) Given that Worldpay and Nets' market shares in Italy are always [0-5]% the increment brought about by the Transaction is negligible  in  all
    affected markets.

Table 1 – Market shares of the Parties in merchant acquiring and its sub-segments in Italy:

   |Sub-segment                                               |ICBPI                          |Nets and Worldpay |Combined                       |
|                                                          |                               |combined          |                               |
|Merchant acquiring overall                                |[30-40]%                       |[0-5]%            |[30-40]                        |
|Domestic payment card schemes                             |[0-5]%                         |[0-5]%            |[0-5]%                         |
|International payment card schemes                        |[50-60]%                       |[0-5]%            |[50-60]%                       |
|Merchant acquiring (point of sale "POS")                  |[30-40]%                       |[0-5]%            |[30-40]%                       |
|Merchant acquiring (web-enabled)                          |[10-20]%                       |[0-5]%            |[10-20]%                       |
|Merchant acquiring, depending on the payment card brand   |[5-10]%-[60-70]%[17]           |[0-5]%            |[5-10]%-[60-70]%               |
|(Visa, MasterCard etc.)                                   |                               |                  |                               |
|Merchant acquiring – debit cards                          |[10-20]%-[20-30]%              |[0-5]%            |[10-20]%-[20-30]%              |
|Merchant acquiring – credit cards                         |[50-60]%-[50-60]%              |[0-5]%            |[50-60]%-[50-60]%              |

Source: Form CO.

37) As shown in the table below, at the EEA-wide level, no affected markets arise in relation to merchant acquiring or aby of  its  sub-segments
    as the combined market shares are always below 15%.

Table 2 - Market shares of the Parties in merchant acquiring and its sub-segments in the EEA[18]:

   |Sub-segment                                                       |ICBPI            |Worldpay         |Nets            |Combined            |
|Merchant acquiring (point of sale "POS")                          |[0-5]%           |[5-10]%          |[0-5]%          |[10-20]%            |
|Merchant acquiring (web-enabled)                                  |[0-5]%           |[5-10]%          |[0-5]%          |[5-10]%             |

Source: Form CO.

38) In Italy, ICBPI mainly competes with merchant acquirers such as Setefi (market share ranging  between  [5-10]%-[20-30]%,  depending  on  the
    exact product market definition),  UniCredit  (market  share  ranging  between  [0-5]%-[20-30]%,  depending  on  the  exact  product  market
    definition), Banca Sella (market share ranging between [0-5]%-[5-10]%, depending on the exact product market definition),  and  BNL  (market
    share ranging between [0-5]%-[5-10]%, depending on the exact product market definition).[19]

39) In view of the small increment and strong competitive landscape, the Transaction does not  give  rise  to  serious  doubts  in  relation  to
    merchant acquiring (and its sub-segments) in Italy or in the EEA.

2 Vertical links

1 Manufacturing and supply of smart payment cards (upstream) and card issuing (downstream)

40) The Transaction gives rise to a vertically affected market between the manufacturing  and  supply  of  smart  payment  cards  (upstream)  by
    Oberthur (portfolio company of Advent International) and the card issuing (downstream) by ICBPI.

41) Upstream, Oberthur has a market share on the market for manufacturing and supply of payment cards of [20-30]% (based on volume)[20] and [20-
    30]% (based on value)[21] at the EEA level, and of [30-40]% (based on volume) and [30-40]% (based on value) in Italy. Oberthur competes with
    various smart card suppliers, such as GemAlto ([30-40]% market share at the EEA level and [30-40]% in Italy), G&D ([10-20]% market share  at
    the EEA level and [10-20]% in Italy), Morpho ([5-10]% market share at the EEA level) and Incard ([10-20]% market share in Italy).[22]

42) ICBPI has a market share of [10-20]% (based on volume)[23] on the overall market for card issuing in Italy. As  regards  narrower  plausible
    markets for card issuing, the market shares of ICBPI (based on volume) are ranging between [30-40]% and [40-50]% in Italy.[24] However,  for
    the purpose of the assessment of the customer foreclosure strategy, it is more appropriate to take into consideration the overall market for
    card issuing as (i) the suppliers of smart payment cards generally manufacture all types of cards and there is one overall (upstream) market
    for the supply of smart payment cards, (ii) the  manufacturing  of  smart  payment  cards  does  not  differ  according  to  different  card
    segments,[25] as those segments are based on differences in customer group, rather than differences in the physical nature of the card used,
    (iii) card issuing companies purchase and issue, with some exceptions, all types of smart payment cards.

43) Based on value[26], the main card issuers in Italy include ICBPI ([20-30]%), Intesa Sanpaolo  ([10-20]%),  UniCredit  ([10-20]%)  and  Poste
    Italiane ([5-10]%).

   Input foreclosure

44) Oberthur on the upstream market faces competition from other significant suppliers such as GemAlto, G&D and  Morpho  who  could  all  supply
    ICBPI's competitors on the downstream market; therefore, any attempt of Oberthur to  engage  in  an  input  foreclosure  strategy  would  be
    unprofitable. In addition, according to the Notifying Parties, the customers purchasing smart payment cards are  powerful  customers  (banks
    that perform card issuing services in-house, or third-party card issuers that provide card issuing to banks on an outsourced basis), able to
    easily switch suppliers and typically engage in multi-sourcing. In addition, there are no exclusive or  long-term  supply  contracts,  as  a
    result of which switching to alternative new suppliers is easy, in all cases possible within two or three months.[27]

45) As a result, it is unlikely that the merged entity would have the ability or the incentive to engage into an input foreclosure strategy.

   Customer foreclosure

46) The Notifying Parties submit that ICBPI currently purchases around […]% of its smart payment  card  requirements  from  [supplier  of  smart
    payment cards] and only […]% from Oberthur.[28]

47) In addition, ICBPI' market position on the downstream market is limited and as such it is not an important customer of smart  payment  cards
    in Italy. Moreover, upstream suppliers compete on a wider market for card manufacturing, including other types of cards and thus have  other
    outlets for their cards than issuers of smart payment cards. Therefore, even if the merged entity would internalize all  current  demand  of
    ICBPI's cards in Italy, this is unlikely to have any significant impact on Obertur's  competitors  upstream  who  could  easily  find  other
    customers. In addition, given the tendency towards technological harmonisation on the  upstream  market,  the  sector  is  gradually  moving
    towards an EEA-wide or even global scope and therefore Italy represents only a small outlet for the EEA suppliers  (manufactures)  of  smart
    payments cards.

48) As a result, is unlikely that the merged entity would have the ability or the incentive to engage into a customer foreclosure strategy.

   Conclusion

49) In light of the above, the Commission concludes that the Transaction does not give rise to serious doubts as to its compatibility  with  the
    internal market in relation to the horizontal link regarding the provision of merchant acquiring services in Italy and vertical link between
    the manufacturing and supply of smart payment cards (upstream) and card issuing (downstream).

       CONCLUSION

50) 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 278, 22.8.2015, p. 7.

[4]   Case  COMP/M.5968  -  Advent  International/Bain  Capital  Investors/RBS  Worldpay,  Case  COMP/M.7241  Advent  International/Bain  Capital
Investors/Nets Holding.

[5]   The remaining members of the board of directors will comprise two directors appointed  by  Clessidra,  two  directors  appointed  by  other
shareholders (i.e. the current shareholder banks), and the Chief Executive Officer.

[6]   Case COMP/M.7241 – Advent International/Bain Capital Investors/Nets Holding paragraph 21, Case COMP/M.5241  –  AmericanExpress/Fortis/Alpha
Card, paragraph 23.

[7]   Case COMP/M.7241 – Advent International/Bain Capital Investors/Nets Holding, paragraph 21.

[8]   Case COMP/M.3998 – Axalto/GemPlus, paragraph 24.

[9]   Case COMP/M.6164 – Barclays Bank/Egg credit card assets, paragraph 9.

[10]  Case COMP/M.7078 – Santander Consumer Finance, El Corte Ingles, Financiera El Corte Inglés, paragraphs 22 –  23;  Case  COMP/M.5384  –  BNP
Paribas /Fortis, paragraphs 14 and 16-40; Case No COMP/M.6164 – Barclays Bank/ Egg credit card assets, paragraphs 9 – 12.

[11]  Case COMP/M.7241 – Advent International/Bain Capital Investors/Nets Holding, paragraph 30.

[12]  Case COMP/M.3998 – Axalto/GemPlus, paragraph 34.

[13]  In Italy, the EMV standard has been adopted and, while Italian implementation (as certified by the Association of  Italian  Banks)  differs
slightly, it nonetheless complies with the international EMV standard adopted by Visa and MasterCard.

[14]  Case COMP/M.7078 – Santander Consumer Finance/El Corte Ingles/Financiera  El  Corte  Inglés,  paragraphs  49-51;  Case  COMP/M.5384  –  BNP
Paribas/Fortis, paragraph 73; Case COMP/M.6164 – Barclays Bank/ Egg credit card assets, paragraph 17.

[15]  Until now many merchant (payment card)  acquirers  have  been  primarily  serving  customers  in  the  Member  States  where  they  set  up
subsidiaries. It is unprofitable for acquirers to serve customers in other Member States since they (and indirectly retailers) would have to  pay
the (higher) interchange fee of the Member State of the retailer. This situation is likely to change for all merchant acquirers after  the  entry
into force of Regulation (EU) 2015/751 on interchange fees for card-based payment transactions (the "Regulation") as  all  interchange  fees  for
consumer card payments will be capped as of December 2015. As a result of the Regulation, all merchant acquirers  established  outside  of  Italy
will have an equal opportunity to target merchants located in Italy. There is, however,  no  indication  that  the  Transaction  could  remove  a
significant potential competitor in Italy.

[16]  Worldpay is active on the Italian market for the provision of merchant acquiring services via its eCommerce business,  which  is  a  multi-
scheme, multi-currency and multi-payment processing operation that provides online merchants with a pan-European  or  global  service.  Customers
generally have global or internet-focused activities, and generally contract with Worldpay centrally in the UK.

*     Should read Wordpay UK

[17]  ICBPI accounts for only [0-5]% for PagoBancomat branded (domestic) acquiring.

[18]  The Notifying Parties were unable to provide estimates for EEA-wide  domestic/international  merchant  acquiring,  as  some  Member  States
operate domestic debit schemes while others operate international debit schemes, and the data do not distinguish between these schemes.

[19]  The market shares for 2013.

[20]  Volume based market shares correspond to the number of cards supplied by the manufacturer.

[21]  Value based market shares correspond to the value of the smart payment cards supplied by the manufacturer.

[22]  Market shares of the competitors are based on volume.

[23]  The market shares are based on volume – number of supplied and issued cards better reflects relationship between the  upstream  market  for
the supply of smart payment cards (on the one hand) and the downstream market for the card issuance (on the other hand)  and  is  therefore  more
appropriate for the assessment of the vertical foreclosure strategies in the present case; as regards the card issuing, value data are  based  on
the value of transactions carried out by cardholders using the cards, something that is not relevant to  ICBPI’s  importance  as  a  customer  of
smart payment cards.

[24]  ICBPI does not issue debit cards and special purpose cards.

[25]  That is debit vs. credit/charge cards, universal/hybrid store credit cards vs. special purpose credit cards,  and  personal  vs.  corporate
cards.

[26]  Value based market share is based on point of sale (POS) and cash advance billed transaction  value  (excluding  domestic  debit  ATM  cash
withdrawals). The Notifying Parties were not able to provide market shares of ICBPI's competitors (card issuers) based on volume.

[27]  This is in the line with the assessment in a previous decision of the Commission. See case COMP/M.3998 – Axalto/GemPlus, paragraph 43.

[28]  [details of supply arrangements].

-----------------------
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                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE