CELEX: 32013M7107
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.7107 - CORDES & GRAEFE / POMPAC / COMAFRANC) according to Council Regulation (EC) No 139/2004 (Only the German text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

                                        Brussels, 19.12.2013
                                        C(2013) 9779 final

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|To the notifying party:                                                |                                                                       |

Dear Sir/Madam,

Subject:    Case No COMP/ M. 7107 – Cordes & Graefe / Pompac / Comafranc Commission decision pursuant to Article 6(1)(b) of Council Regulation
         No 139/2004[1]

    1) On 18 November 2013 the European Commission received notification of a proposed concentration pursuant to Article 4 of Council  Regulation
       (EC) No 139/2004 by which the undertaking Cordes & Graefe KG (Germany) acquires within  the  meaning  of  Article 3(1)(b)  of  the  Merger
       Regulation sole control of the undertakings Pompac SA (France) and Comafranc SA (France) by way of purchase of shares. Cordes & Graefe KG,
       Pompac SA and Comafranc SA are hereinafter collectively referred to as "the Parties".

       I.   THE PARTIES

    2) Cordes & Graefe KG (“C&G”) is active in the wholesale of building materials and in the retail sale of building materials  to  professional
       customers, such as craftsmen and engineers. Its services and products include plumbing fittings,  heating,  air  conditioning/ventilation,
       electrical equipment, installation, roofing technology, as well as excavation and industrial technology. C&G operates  exhibition  centres
       and wholesale depots for building materials with a focus on Germany.

    3) Pompac SA and Comafranc SA are the holding companies of the Pompac group. Pompac SA currently holds a controlling shareholding of 67.8% in
       Comafranc SA. Like C&G, the Pompac group is active in the wholesale  and  retail  sale  of  certain  building  materials  to  professional
       customers, including plumbing fittings, heating, tiling and electrical equipment, with a focus on France. The Pompac  group  is  currently
       mainly owned by three members of the Gay family who hold […]%, […]% and […]% of the shares in Pompac SA and around […]%, […]% and […]%  of
       the direct shares in Comafranc SA respectively.

       II.  THE OPERATION

    4) C&G and the Gay family members signed a Letter of Intent (LoI) on 31 October 2013. According to the LoI, Pompac SA and Comafranc  SA  will
       first be merged into a new entity. Subsequently, C&G will acquire [<50]% of the shares in the  merged  Pompac  SA/Comafranc  SA  entity[2]
       while the three Gay family members will each retain shareholdings of approximately […]%. The merged Pompac  SA/Comafranc  SA  entity  will
       hereinafter be referred to as “Pompac”.[3]

    5) On 17 December 2013, C&G and the Gay family members entered into an Additional Agreement regarding certain amendments to the LoI.

    6) According to Article 1 of the Additional Agreement, C&G will hold the majority […]. The management of Pompac will be obliged  to  […].  In
       particular, the supervisory board will have to [...].[4]

    7) Furthermore, according to Article 2 of the Additional Agreement, the Gay family members are obliged to […].

    8) The Commission considers that control is normally acquired where an undertaking acquires a majority of the voting rights of a  company.[5]
       Even in the case of a minority shareholding sole control may occur in situations where specific rights are attached to this  shareholding,
       which allow the minority shareholder to determine the strategic behaviour of the target company.[6] Such specific rights can  include  the
       power to appoint more than half of the members of the supervisory board.[7]

    9) Against this background, the Commission finds that according to the terms of the LoI in conjunction with  the  Additional  Agreement,  C&G
       will have the power to determine the strategic behaviour of Pompac by being able to […]. C&G will thus acquire control over Pompac.

   10) The remaining shareholders will not be in a position to […] and will not have […] relating to  the  strategic  behaviour  of  Pompac.  The
       remaining shareholders will thus not have control over Pompac after the proposed transaction.

   11) The Commission therefore concludes that C&G will acquire sole control over Pompac through the proposed transaction within the  meaning  of
       Article 3(1)(b) of the Merger Regulation.

       III. EU DIMENSION

   12) The undertakings concerned have a combined aggregate world-wide turnover  of  more  than  EUR  5 000  million[8]  (C&G:  EUR  […];  Pompac
       SA/Comafranc SA: EUR […]). Each of them has an EU-wide turnover in excess  of  EUR 250 million  (C&G:  EUR […];  Pompac  SA/Comafranc  SA:
       EUR […]), 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 pursuant to Article 1(2) of the Merger Regulation.

       IV.  PRELIMINARY ASSESSMENT

   13) The activities of the Parties are complementary from a geographic point of view. C&G’s activities are focused on Germany ([>70]% of its EU-
       wide turnover) while Pompac’s activities are focused on France ([>80]% of its EU-wide turnover).

   14) The proposed transaction therefore only leads to limited horizontal overlaps between the activities of C&G and Pompac with respect to  the
       sale of plumbing, heating and air conditioning products as well as  electrical  products  in  Germany,  France,  Belgium  and  Luxembourg.
       Furthermore, both companies are active in the purchase of plumbing, heating and air conditioning products as well as electrical products.

1. Sale of plumbing, heating and air conditioning products

a. Product market definition

   15) The sale of plumbing, heating and air conditioning products falls into the wider category of sales of building materials.  The  Commission
       has in previous cases delineated the relevant product markets for the sale of building materials on the basis of distribution channels and
       considered separate product markets for (i) the wholesale distribution of building materials, i.e. sales to retailers (ii) the retail sale
       of building materials to professional customers, primarily through builders’ merchants and (iii) the retail sale of building materials  to
       non-professional customers, primarily through DIY stores.[9]

   16) Within the market for the retail sale of building materials to professional customers  the  Commission  has  further  considered  separate
       markets for specialised retailers and generalists without taking a final view on this aspect of the product market definition.[10]

   17) The Parties are active mainly in the specialised retail sale of building materials (plumbing, heating and air  conditioning  products)  to
       professional customers. They are not active in the retail sale to non-professional customers and have only marginal sales  as  wholesalers
       which will not be assessed further in this decision.[11]

   18) As regards different product groups of building materials, the Commission has in the past considered a separate  product  market  for  the
       retail sale to professional customers of heating, plumbing and sanitary products without taking a final view on this aspect of the product
       market definition.[12] The German Federal Cartel Office has found for the German market that the relevant market is the market  for  sales
       of plumbing, heating and air conditioning products.[13]

b. Geographic market definition

   19) The Commission has found in previous cases that the market for the retail sale of building materials to professional  customers  could  be
       regarded as national but has also considered a narrower scope of 40 to 100 km from the point of sale or of administrative districts in the
       case of Germany and France.[14] This is similar to the German Federal Cartel Office’s practice for the German market.[15]

c. Competitive assessment

   20) The activities of the Parties are largely complementary from a geographic point of view and overlap only marginally due to limited  cross-
       border exports in Belgium, France, Germany and Luxembourg. The transaction leads to affected markets for the sale of plumbing, heating and
       air conditioning products at the national and local level in Germany and at the local level in France.

   Table 1 Market shares at the national and local level[16]

|Market shares for plumbing, heating and air conditioning products, 2012                                             |
|                                        |C&G                     |Pompac                  |Combined                |
|Belgium                                 |[0-5]%                  |[0-5]%                  |[0-5]%                  |
|France                                  |[0-5]%                  |[5-10]%                 |[5-10]%                 |
|   |Lorraine                            |[0-5]%                  |[20-30]%                |[20-30]%                |
|   |Alsace                              |[0-5]%                  |[30-40]%                |[30-40]%                |
|Germany[17]                             |[20-30]%                |[0-5]%                  |[20-30]%                |
|   |Southern Rhineland-Palatinate and   |[10-20]%                |[0-5]%                  |[10-20]%                |
|   |Saarland                            |                        |                        |                        |
|Luxembourg                              |[5-10]%                 |[0-5]%                  |[5-10]%                 |

      Source: Form CO – market shares calculated on the basis of the parties' estimates using publicly available information on the  turnover  of
      craftsmen in the plumbing, heating and air conditioning sector

   21) The increments in market shares are marginal in all relevant markets. C&G does not have any points of sale in France and exported products
       into France of a total value of EUR […] in 2012. Similarly, Pompac does not have any points of sale in Germany and exported products  into
       Germany of a total value of less than EUR […] in 2012.

   22) In the light of the information above, the Commission concludes that the competitive pressure imposed by  the  Parties’  on  each  other’s
       business operations in the retail sale of plumbing, heating and  air  conditioning  products  to  professional  customers  is  negligible.
       Therefore the transaction does not change the competitive situation to an appreciable extent and thus does not give raise  to  competitive
       concerns.

2. Sale of electrical products

   23) Regarding the sale of electrical products, the Commission has considered a separate market for the wholesale  distribution  of  electrical
       products to professional customers excluding direct sales by manufacturers.[18] Such electrical products include  electrical  installation
       equipment, cables, lighting sources and equipment, communication and security products. The market was found to be national in  geographic
       scope.[19]

   24) The activities of the Parties in the wholesale distribution of electrical products overlap in Germany but do not lead to affected  markets
       with a combined market share of [0-5]% and an increment through Pompac’s activities of [0-5]%.

3. Purchase of plumbing, heating, air conditioning and electrical products

   25) The Commission has considered the market for the procurement of electrical products by  wholesalers  from  suppliers  to  be  national  in
       geographic scope.[20] Moreover, the German Competition Authority has considered the market for the procurement of  plumbing,  heating  and
       air conditioning products by wholesalers to be equally national in geographic scope.[21]

   26) The Parties do not purchase plumbing, heating, air conditioning and electrical products in the  same  national  markets.  The  transaction
       therefore does not lead to an overlap between the activities of the Parties in the same relevant geographic market.

       V.   CONCLUSION

   27) 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

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[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]   LoI, Annex 5.1/a. to the Form CO, page 21.

[3]   C&G submits that in a subsequent step it intends to acquire a majority stake of […]% in Pompac. According to the  LoI,  C&G  has  the  pull
      option and the Gay family members have the put option for C&G to acquire this additional stake in Pompac  three  years  after  the  initial
      acquisition of the [...]% stake. However, if neither of the Parties exercises its option, the acquisition will not occur (LoI, Annex 5.1/a.
      to the Form CO, page 18). The Commission considers that the put and pull options should not be taken into account in the assessment of  the
      present transaction. There is uncertainty as to the exercise of the options since the Parties’ preferences  might  change  over  time.  The
      Commission therefore concludes that it can at this stage only assess the first step of the  transaction,  namely  the  acquisition  of  the
      controlling […]% minority stake, since only that planned acquisition constitutes a  matter  of  fact  and  law  existing  at  the  time  of
      notification, see paragraph 60 of the Commission Consolidated Jurisdictional Notice, hereinafter referred to as “CJN” (OJ C95,  16.04.2008,
      p1).

[4]   Article 1(3) of the Additional Agreement in conjunction with the LoI, p. 17.

[5]   Paragraph 56 of the CJN.

[6]   Paragraph 57 of the CJN.

[7]   Ibid.

[8]   Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the CJN.

[9]   See Cases COMP/M.3142, CVC/Danske Traelast,  paragraphs  11-12;  COMP/M.  3184  –  Wolseley/  Pinault  Bois  &  Materiaux,  paragraph  8ff;
      COMP/M.3407 – Saint Gobain/Dahl, paragraph 12; COMP/M.4050, Goldman Sachs/Cinven/Ahlsell, paragraph 9.

[10]  See Cases COMP M.1974, Compagnie de Saint-Gobain/Raab Karcher, paragraph 8; COMP/M.3184 - Wolseley/Pinault Bois & Materiaux, paragraphs 13-
      16.

[11]  The Parties’ activities in the wholesale distribution of building materials are marginal ([0-5]% of C&G’s turnover and [0-5]%  of  Pompac’s
      turnover) and do not overlap in the same relevant geographic markets because C&G’s wholesale distribution activities are limited to Germany
      and Austria while Pompac’s wholesale distribution activities are limited to France.

[12]  See Case COMP/M.3184 – Wolseley/Pinault Bois & Materiaux, paragraph 12; however, the Commission did not consider such a differentiation  in
      case COMP/M.3142 – CVC/Danske Traelast, paragraphs 11-12.

[13]  See FCO case report regarding B5-63/10, decision of 13.8.2010, and FCO case report regarding B5-47/09, decision of 27.8.2010.

[14]  See Cases COMP M.1974, Compagnie de  Saint-Gobain/Raab  Karcher,  paragraphs  10-12;  COMP/M.3142  –  CVC/Danske  Traelast;  COMP/M.3142  –
      CVC/Danske Traelast, paragraph 14; COMP M.3184, Wolseley/Pinault Bois & Materiaux, paragraphs 18-22.

[15]  See FCO case report regarding B5-63/10, decision of 13.8.2010, and FCO case report regarding B5-47/09, decision of 27.8.2010.

[16]  Pompac’s exports into Germany are exclusively into the regions of the Black Forest, Karlsruhe, Southern Rhineland-Palatinate and  Saarland;
      C&G’s exports into France are almost exclusively ([…]%) into the regions of Lorraine and Alsace.

[17]  The German market share of C&G includes sales made by the Whilhelm Gienger group. C&G and  the  Wilhelm  Gienger  group  cooperate  in  the
      purchasing and in certain marketing activities of building materials.  Including  the  turnover  of  the  Whilhelm  Gienger  group  in  the
      calculation of C&G’s turnover in Germany therefore constitutes  the  most  conservative  approach  without  taking  a  final  view  on  the
      competitive dynamics between C&G and the Wilhelm Gienger group. C&G is not active in the regions Karlsruhe and Black Forest.

[18]  See Case COMP/M.4963, Rexel/Hagemeyer, paragraphs 14-22; COMP/M.2034 – Hagemeyer/WF Electrical, paragraph 9.

[19]  See Case COMP/M.4963, Rexel/Hagemeyer, paragraph 27; COMP/M.2034 – Hagemeyer/WF Electrical, paragraph 12.

[20]  See f. e. case COMP M.4963, Rexel/Hagemeyer, paragraph 28.

[21]  See FCO case report regarding B5-63/10, decision of 13.8.2010, and FCO case report regarding B5-47/09, decision of 27.8.2010.

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                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE