CELEX: 32015M7682
Language: en
Date: 2015-08-05 00:00:00
Title: Commission Decision of 05/08/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7682 - GOLDMAN SACHS / ALTOR / HAMLET) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 5.8.2015
C(2015) 5671 final

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Dear Sir/Madam,

Subject:    Case M.7682 – GOLDMAN SACHS /ALTOR/ HAMLET
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1]

    1) On 10 July 2015, the European Commission received notification of a proposed concentration pursuant to Article 4 of the Merger  Regulation
       by which the undertakings The Goldman Sachs Group, Inc. ("Goldman Sachs", United States) and  Altor  Fund  IV  ("Altor",  Sweden)  acquire
       within the meaning of Article 3(1)(b) of the Merger Regulation joint control of the whole of the undertaking Hamlet Protein A/S ("Hamlet",
       Denmark) by way of purchase of shares. Goldman Sachs and Altor are collectively referred to as the "Notifying  Parties",  whereas  Goldman
       Sachs, Altor and Hamlet are jointly referred to as the "Parties".

       THE PARTIES

    2) Goldman Sachs is a global investment banking, securities and investment management firm  that  provides  a  range  of  financial  services
       worldwide to a client base that includes corporations, financial institutions, governments and high-net-worth individuals.

    3) Altor is a private equity fund which focuses on investments in the mid-market segment of the Nordic region.

    4) Hamlet is active in the development, production and sale of soy proteins used in high value animal feed, primarily for young animals  such
       as piglets, calves and poultry. Hamlet operates from premises in Horsens (Denmark) and Findlay (Ohio, USA).

       THE OPERATION AND THE CONCENTRATION

    5) Altor currently indirectly owns […]% of the shares in Hamlet and Goldman Sachs owns the remaining […]%. According to the Letter  Agreement
       dated 28 May 2015, each of Goldman Sachs and Altor will indirectly own a […]% interest in Hamlet after the proposed transaction.

    6) […].

    7) […].

    8) In view of the above, Goldman Sachs and Altor will acquire joint control of Hamlet.

    9) The proposed transaction therefore constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

       EU DIMENSION

   10) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR […] million[2] [Goldman Sachs: EUR […]  million;
       Altor: EUR […] million; Hamlet: […] million]. Each of them has a EU-wide turnover in excess of EUR […] million  [Goldman  Sachs:  EUR  […]
       million; Altor: EUR […] million; Hamlet: […] 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.

       APPLICABILITY OF THE EEA AGREEMENT

   11) Article 8 of the EEA Agreement[3] provides that "unless otherwise specified", the provisions of the EEA Agreement shall apply only to:

      – products falling within Chapters 25 to 97 of the Harmonized Commodity Description and Coding System ("HS Nomenclature"),  excluding  the
        products listed in Protocol 2 to the EEA Agreement[4];

      – products specified in Protocol 3 to the EEA Agreement[5], subject to the specific arrangements set out in that Protocol.

   12) In the case at stake, the HS nomenclature of fish feed is 23.09.90. As regards soy protein, this product also falls within Chapter  23  of
       the HS Code.[6] None of these two products are covered in Protocol 3 to the EEA Agreement. Consequently, they are not subject  to  Article
       57 of the EEA Agreement on merger control.

   13) The assessment of the impact of the merger for the above mentioned products in the EFTA States hence falls outside the jurisdiction of the
       European Commission. Consequently, this decision will only cover the EU with regard to those products.

   14) According to the Notifying Parties, the merger, in so far as those products are concerned, is  subject  to  notification  in  Norway.  The
       current decision is without prejudice to the outcome of the merger proceedings in Norway.

       COMPETITIVE ASSESSMENT

   15) There are no horizontal overlaps between Hamlet and the Notifying Parties or any undertaking they control.

   16) However, there is a potential vertical relationship between Hamlet and EWOS, which is jointly controlled by Altor and Bain Capital.[7]

   17) In the EEA, EWOS produces and supplies complete compound fish feed for salmonid (salmon and trout) farmed fish and uses various  types  of
       protein (including soy protein) as an input. As a consequence, it is active in a market downstream of Hamlet.

1 Product market definition

1 Soy bean meal and soy protein products

   18) Oilseed meal (to which soy bean meal belongs) is used widely in animal feed and fish feed as a source of protein. It is obtained as a  by-
       product from crushing of oilseeds (mainly soy, rape and sunflower). In Cargill/Agribrands, the Commission found there to  be  a  chain  of
       substitution between the different types of oilseed meal and therefore they could be seen as belonging to one market but  ultimately  left
       the market definition open.[8] Similarly, the Commission left open the precise product  market  definition  for  oilseed  meals  in  other
       cases.[9]

   19) Under a more restrictive approach, the market for soy bean meal could be considered as a separate market in  particular.  According  to  a
       previous market investigation, soy bean meal is the meal that has the highest protein content of all non-grain  feed  ingredients  and  is
       therefore the most valuable one. However, prices of other ingredients are highly correlated—in accordance with their protein  content—with
       the price of soy bean meal.[10] Thus, in a past decision, the possibility of singling out the soy bean market as  an  independent  product
       market was considered but ultimately not closed.[11]

   20) Under an even more restrictive approach, markets could be defined for each protein product derived from soy bean: this includes soy  flour
       protein, textured protein, soy protein concentrates ("SPC") and soy protein isolate ("SPI"). Hamlet only produces SPC but no SPI.

   21) In animal feed, SPC is used specifically as a particularly rich protein source for instance in pet food, calf  and  fish  feeds.  In  past
       decisions, a separate market for SPC was considered but ultimately left open.[12]

   22) In the Notifying Parties’ view, Hamlet’s products form part of an overall market for protein products that includes  (i)  at  least  other
       vegetable protein products such as oilseed meals; and (ii) protein derived from animal sources.

   23) According to the Notifying Parties, a more narrowly defined market for Hamlet’s products could be the market  for  soy  protein  products,
       which would include SPC and soy meal. The Notifying Parties consider that SPC does not constitute separate product markets.

   24) The precise scope of the relevant market with regard to soy bean meal and soy protein products can be ultimately left open in the  current
       case, since no competition issues arise under any possible market definition.

2 Fish feed

   25) Fish feed is produced as pellets. Fish feed constitutes extruded  feed  formulated  for  particular  species  of  farmed  fish.  The  main
       ingredients are […],[…],[…],[…],[…] and […]. Different formulations of feed may be required for each species of fish and for each stage of
       its development.

   26) In its previous decisions relating to animal feed, the Commission has defined separate markets for single feed,  compound  feed  and  feed
       mixes. Moreover, complete feed is a possible subsegment of compound feed.[13] The  Commission  has  also  considered  that  aqua  feed  is
       distinct from other animal feed, as the production processes, ingredients, distribution channels and customers  for  fish  feed  are  very
       different from those of other types of animal feed.[14] Furthermore, the Commission has also considered a possible further subdivision  of
       aqua feed based on the type of fish, and held it probable that there is a distinct market for aqua feed for farmed salmon.[15]

   27) The Notifying Parties consider that the precise scope of the relevant market with regard to fish feed can be ultimately left open  in  the
       current case because no competition issues arise under any possible market definition. However,  […],  they  have  provided  data  on  the
       narrowest possible basis (that is, complete feed for salmonids) and also on an even narrower basis segmented  between  complete  feed  for
       salmon and trout respectively.

   28) The precise scope of the relevant market with regard to fish feed can be ultimately left open in the current case,  since  no  competition
       issues arise under any possible market definition.

2 Geographic market definition

1 Soy bean meal and soy protein products

   29) In previous decisions, the Commission has found the market for oilseed meal to be at least EEA-wide. On  one  hand,  transport  costs  for
       oilseed meal do play an important role, as such limiting the distance over which it can  be  transported  at  economically  viable  costs.
       However, oilseed products are traded on the international commodity markets of  Chicago  and  Rotterdam  and  there  are  no  barriers  to
       trade[16].

   30) The Commission has also considered to the market for protein products to be at least EEA-wide.[17] It also considered that the  geographic
       market for oil meal and SPC were at least EEA-wide.[18] In another decision, the Commission  considered  on  the  basis  of  a  market  of
       investigation that the market could be narrower than the EEA-level and potentially national but ultimately left the definition open.[19]

   31) The Notifying Parties submit that the geographic market for soy protein products is at least  EEA-wide  because  there  are  no  physical,
       economic or regulatory barriers on Hamlet’s products being sold throughout the EEA. They consider that the market could even be wider than
       the EEA given the high level of imports into the EEA of protein products including oilseed meals such as soy meal and SPC.  The  Notifying
       Parties submit that EWOS purchases almost all of its needs for soy protein products (SPC and soy meal) directly from […] suppliers.

   32) The precise scope of the relevant market with regard to soy protein products can be ultimately left open in the  current  case,  since  no
       competition issues arise under any possible market definition.

2 Fish feed

   33) The Commission has previously considered the market for fish feed to be national, mainly because of the high  transport  costs,  but  also
       considered that the market for aqua feed for salmon is in the process of being regionalised with a  distinct  market  for  the  North  Sea
       basin.[20]

   34) The Notifying Parties consider, however, that the precise scope of the geographic market for fish feed for salmonid can in  this  case  be
       left often as it could be either EEA-wide or national. They submit that although fish feed is mainly sold on a national basis and although
       there are local factors that influence the content of feed in particular countries, there  are  significant  trade  flows  between  Member
       States. Consequently, they have provided market shares at EEA level, for the North Sea basin and on  a  national  basis  for  the  United-
       Kingdom and Ireland.

   35) The precise scope of the relevant geographic market with regards to fish feed can be ultimately left open in the current  case,  since  no
       competition issues arise under any possible geographic market definition.

3 Competitive assessment

   36) Hamlet manufactures and supplies soy protein products. EWOS uses soy proteins as an ingredient  for  the  production  of  fish  feed.  The
       proposed transaction thus creates a vertical relationship, between Hamlet, as a supplier of soy proteins (upstream), and EWOS, a fish feed
       producer (downstream).

   37)  […].

   38) According to the Notifying Parties, Hamlet's market share for soy protein products is less than [0-5]% in  the  EEA[21].  As  regards  the
       possible narrower market of SPC, its EEA-wide market share is of [5-10]%.[22]

   39) EWOS' market share exceeds 30% in the supply of complete feed for salmonid in the narrower national markets in the UK  ([40-50]%)[23]  and
       the Republic of Ireland [60-70]%, and the possible wider market of the North Sea Basin [30-40]%. The national  market  in  Norway  [30-40]
       %[24] would also be affected, but as fish feed is not covered by the  EEA  Agreement,  this  downstream  market  is  not  covered  by  the
       Commission's assessment.

   40) The proposed transaction thus gives rise to the following vertically affected markets:

         – the EEA-wide market soy bean meal and soy protein products, including SPC, as an input in animal feed and fish feed (upstream),

         – the national market for the supply of fish feed (complete feed for salmonids) in the Republic of Ireland and the UK, as well  as  the
           wider market of the North Sea Basin (downstream).

   41) However, as explained below, the proposed transaction is unlikely to give rise to input and customer foreclosure.

   42) The market investigation confirmed the  lack  of  input  or  customer  foreclosure  concerns:  markets  participants  did  not  raise  any
       substantiated concerns as to the vertical relationship between EWOS and Hamlet.

   43) In particular, suppliers of soy protein products and SPC confirmed that currently they are selling sow protein products and SPC  to  other
       customers than EWOS, within and outside the aqua feed industry.[25] Suppliers also stated  that  their  output  could  be  sold  to  other
       customers located outside the EEA in case of any attempt to implement customer foreclosure.

1 No risk of input foreclosure

   44) The Notifying Parties submit that Hamlet has never developed any special products for the fish  feed  segment  specially  adapted  to  the
       nutrition needs of fish. Hamlet's products are developed primarily for young animals such as piglets, calves and poultry.

   45) In the recent past, it has only had […] in the fish feed sector. […] soy protein products are an expensive source  of  proteins  for  fish
       feed ([…] more expensive than other possible sources for the same protein intake).

   46) The Commission considers that the proposed transaction is unlikely to give rise to input foreclosure  concerns  because  of  Hamlet's  low
       market shares for both soy protein products ([0-5])%) and the narrower market of SPC ([5-10]%) in the upstream market.

   47) Moreover, the majority of customers operate a multi-sourcing strategy. As regards EWOS, it purchases almost all of its SPC  from  two  […]
       suppliers.

   48) Finally, there are a large number of competing upstream suppliers from whom downstream customers may purchase soy  protein  products.  The
       EEA is a major importer of soy protein products from worldwide soy protein product producers. The largest  companies  active  in  the  soy
       protein product market in the EEA and worldwide, according to the Notifying Parties, are ADM, Bunge, Cargill and Louis Dreyfus. There  are
       also a large number of smaller domestic and international competitors active in the EEA including Imcopa, Caramuru, Sementes Selecta, Soya
       Protein, Nutraferma, GB Tech and DaBomb who individually have a market share of less than […]%.[26] The largest SPC suppliers in  the  EEA
       are Imcopa (approximately […]%) and Selecta ([…]%).

2 No risk of customer foreclosure

   49) The Notifying Parties claim that even if EWOS switched its entire demand for soy protein to Hamlet, there would remain significant  demand
       for soy protein from other users. The Notifying Parties also claim that Hamlet's products are developed primarily for young  animals  such
       as piglets, calves and poultry ([…]% of Hamlet's turnover can be attributed to piglets). […].

   50) The Commission observes that EWOS has two strong competitors in the fish feed market, Skrettig[27] and BioMar[28] and as such  there  will
       remain two large downstream customers in the fish-feed segment to whom Hamlet's rivals  will  be  able  continue  to  supply  soy  protein
       products and SPC. Moreover, besides EWOS, Skrettig and BioMar, in the EEA other aqua feed competitors account for [20-30]% of  the  market
       complete salmonid feed market.

   51) In addition, EWOS’s demand for soy protein products[29] amounts to less than […]% of the total sales in the EEA of  soy  protein  products
       and, using a narrower market definition for Hamlet’s products, between […]% of the total sales in the EEA of SPC. Hence, […]% of  the  SPC
       market in the EEA does not account for EWOS' demand.

   52) Moreover, soy protein products and SPC are sold at an EEA-wide market. There are also numerous alternative downstream customers given that
       soy protein products are used as inputs in many other product markets. The different types of  purchasers  of  soy  protein  products  are
       generally animal feed formulators, compound feed manufacturers, pre-mix manufacturers and integrators. As regards SPC, its purchasers  are
       generally the same as for soya protein products. SPC is used, in particular, besides aqua  feed,  for  pet  food;  milk  replacements  for
       calves; and feed for young animals (especially starter feed for pigs and poultry).

   53) Therefore, EWOS would have no ability post-merger to engage in customer foreclosure.

       CONCLUSION

   54) 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)
Cecilia MALMSTRÖM
Member of the Commission

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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]   Turnover calculated in accordance with Article 5 of the Merger Regulation and the Commission Consolidated Jurisdictional Notice (OJ  C  95,
16.4.2008, p. 1)

[3]   Agreement on the European Economic Area, OJ No L 1, 3.1.1994, p. 3.

[4]   EEA Agreement, Protocol 2 on products excluded from the scope of the Agreement in accordance with article 8(3)A.

[5]   EEA Agreement, Protocol 3 concerning products referred to in Article 8(3) B of the Agreement.

[6]   When Hamlet exports its soy protein products, HS Code 23099096 applies and when Hamlet imports its  own  products  from  the  US,  HS  Code
23040000 applies.

[7]   M.7015 – Bain Capital/Altor/EWOS.

[8]   M.2271 – Cargill/Agribrands, par. 9.

[9]   M.6383 – Cargill/Korofrance par. 37.

[10]  M.4042 – Toepfer/ Invivo/Solès, par. 17.

[11]  M.941 – ADM/Actos & Hutcheson – Soya Mainz, par. 15.

[12]  M.941 – ADM/Actos & Hutcheson – Soya Mainz, par. 17; M.1126 – Cargill/Vandemoortele, par. 12.

[13]  M.6468 – Forfarmers/Hendrix; M.6383 - Cargill/KoroFrance.

[14]  M.2956 – CVC/PAI Europe/Provimi.

[15]  M.3722 – Nutreco/Stoltnielsen/Marine Harvest JV.

[16]        M.2271 – Cargill/Agribrands, par. 11.

[17]  M.1126 – Cargill/Vandemoortele, par. 13.

[18]  M.941 – ADM/Actos & Hutcheson – Soya Mainz, par. 17-18.

[19]  M.4042 – Toepfer/ Invivo/Solès, par. 34.

[20]  M.3722 – Nutreco/Stoltnielsen/Marine Harvest JV.

[21]  Hamlet's worldwide market share for soy protein products is also less than [0-5]%.

[22]  [0-5]% worldwide. Even if the markets for soy protein products and SCP were hypothetically considered to be national in the  United-Kingdom
and the Republic of Ireland, Hamlet's market share would be below [0-5]% according to the Notifying Parties. In the regional market of the  North
Sea basin Hamlet's SPC market share would be below [5-10]%.

[23]  Complete feed for salmon ([40-50]%), complete feed for trout ([20-30]%).

[24]  Complete feed for salmon ([30-40]%), complete feed for trout ([50-60]%).

[25]  For instance, a supplier of EWOS stated that 2/3 of its EEA SPC volumes go to other customers.

[26]  Market participants such as Selecta and Caramuru confirmed that they are selling sop protein products and SPC in the EEA.

[27]  [30-40]% in the North Sea Basin, [20-30]% in the UK. Skretting has a [20-30]% market share at EEA-level.

[28]  [20-30]% in the North Sea Basin, [30-40]% in the UK. BioMar has a [10-20]% market share at EEA-level.

[29]  Approximately […] MT per year in Europe.

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 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.

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