CELEX: 32014M7359
Language: en
Date: 2014-10-27 00:00:00
Title: Commission Decision of 27/10/2014 declaring a concentration to be compatible with the common market (Case No COMP/M.7359 - PCCR USA / TOTAL'S CCP COMPOSITE BUSINESS) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

                                      Brussels, 27.10.2014
                                      C(2014) 8116 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|omitted has been replaced by ranges of figures or a general |           |                                                               |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 M.7359 - PCCR USA/ TOTAL'S CCP COMPOSITE BUSINESS
         Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139 / 2004[1]

1. On 30 September 2014, the European Commission received a notification of a proposed concentration pursuant to Article 4 of Council  Regulation
   (EC) No 139/2004 by which PCCR USA, Inc ("PCCR", the United  States),  a  fully  owned  subsidiary  of  Polynt  Group  SàRL  ("Polynt  Group",
   Luxembourg) acquire within the meaning of Article 3(1)(b) of the Merger  Regulation  sole  control  of  the  undertakings  CCP  Composites  SA
   (France), CCP Composites UK Limited (the United Kingdom), CCP Composites Canada, Inc. (Canada), CCP Composites US LLC (the United States), CCP
   Composites Korea Co., Ltd. (South Korea), CCP Composites Resins España, SLU (Spain), CCP Composites e Resinas do  Brazil  Ltda  (Brazil),  CCP
   Australia Pty Ltd. (Australia), CCP Composites Resins Malaysia Sdn Bhd (Malaysia), CCP  Composites  Guangzhou  Co.  (China),  Ltd  (altogether
   referred to as "CCP Composites Business") by way of purchase of shares.

I.    THE PARTIES AND THE OPERATION

2. PCCR is a fully-owned subsidiary of Polynt Group. PCCR is active in the production and the sale  of  resins  for  the  coating  and  composite
   industry in North America (US and Canada). Polynt Group holds jointly with other companies the undertaking Polynt S.p.A. ("Polynt"), which  is
   active in the production of chemical intermediates such  as  unsaturated  polyester  resins  ("UPR"),  related  commodities  and  specialities
   chemicals in the EEA. Polynt Group is hereinafter referred to as the "Notifying Party".

3. CCP Composite Business is a fully-owned business unit of Total SA's specialty chemical business, including the production and the sale of  UPR
   and gel coats worldwide. Together, Polynt Group and the CCR Composite Business are hereinafter referred to as "the Parties".

4. The proposed concentration consists in the acquisition of sole control  by  PCCR  over  the  ten  entities  forming  CCP  Composite  business,
   according to a single Share Sale Agreement ("SSA"). Consequently, PCCR will hold 100% of the shares of CCP Composite business.

5. In accordance with the Jurisdictional Notice[2], the concentration constitutes a unitary transaction due  to  the  fact  that,  following  the
   closing, PCCR shall acquire sole control over all ten subsidiaries which form the CCP  Composite  business,  and  that  it  follows  from  the
   provisions of the SSA (in particular that all of the different acquisitions forming part of this transaction are  provided  for  in  a  single
   contract, and that a single purchase price is agreed for the entire transaction) that all of these acquisitions stand and fall together.

6. Therefore, the proposed transaction qualifies as a concentration within the meaning of Article 3 1(b) of the Merger Regulation.

II.   EU DIMENSION

7. The proposed concentration does not have an EU dimension within the meaning of Article 1 of the Merger  Regulation.  The  Parties'  aggregated
   worldwide turnover is below EUR 5 billion […]. The combined aggregate turnover of the Parties is more than EUR 100 million in Spain […], Italy
   […], the UK […], France […] and Germany […]. However, the aggregate turnover of each of the undertakings  concerned  is  higher  than  EUR  25
   million only in France […] and the UK […].

8. Due to the fact that the case fulfils the criteria for being notified in three different Member States (France, Germany, Spain), on  4  August
   2014 the Notifying Party submitted to the Commission by means of a reasoned submission, a referral request pursuant to  Article  4(5)  of  the
   Merger Regulation with respect to the proposed concentration.

9. On 5 August 2014, the Commission sent to the Member States a Note on the proposed submission, asking them to  express  their  opinion  on  the
   proposed referral within 15 working days. As none of the Member States expressed their disagreement, the concentration  was  referred  to  the
   Commission.

10. The notified concentration therefore achieved an EU dimension in accordance with Article 4(5) of the Merger Regulation.

III.  COMPETITIVE ASSESSMENT

11. According to the Notifying Party, the proposed concentration gives rise to only one horizontally affected market in the  EEA,  which  is  the
   market of UPR. The proposed concentration also gives rise in the EEA to vertical relations between UPR and two upstream markets  (the  markets
   for production and the sale of maleic and phthalic anhydrides) and to two downstream markets (the market of thermoset compounds and the market
   of gel coats). However, the Notifying Party confirmed that there would be no affected vertical relationship in the  EEA  under  any  plausible
   alternative market definition. Therefore, only the market for UPR will be further analysed.

     III.1 Product market definition

12. UPR is produced by the poly-condensation of saturated and unsaturated dicarboxylic acids (MA) with glycols.  On  their  own,  UPR  have  only
   limited structural integrity. However, they form highly durable structures and coatings when they are cross-linked  with  a  vinylic  reactive
   monomer, most commonly styrene. This type of UPR is called "virgin" UPR.

13. Virgin UPR are often combined with fiberglass or mineral fillers to enhance their mechanical strength, resulting in  "reinforced"  UPR.  Such
   reinforced UPR are mostly used for construction, marine and land transportation industries, because they are  resistant  to  corrosion,  fire,
   etc., while non-reinforced UPR are used to make cultured marble and solid surface counter tops, gel coats, automotive repair putty and  filler
   and other products such as bowling balls and buttons.

14. The Commission has not previously defined the market for UPR.[3] The Notifying Party submits that UPR constitutes a separate product  market,
   since UPR are distinct products in the market for resins, and is not entirely substitutable with other types of existing resins, due to  their
   specific properties and uses.

15. From the supply side, the Notifying Party argues that all suppliers use identical  raw  material  formulations  and  the  same  manufacturing
   process to manufacture UPR. From the demand side, all customers purchase virgin UPR. Depending on their products, the customers  then  produce
   reinforced UPR themselves, if needed. Moreover, the Notifying Party argues that there is no price difference between  UPR  sold  to  different
   industries.

16. Respondents to the market investigation indicated that suppliers competing with the Parties on the UPR market produce  only  virgin  UPR  and
   not reinforced UPR.[4] Competitors responding to the market investigation indicated that their customers are spread across different types  of
   industries, such as automotive, maritime, constructions, wind energy, etc. However, although the majority of UPR customers responding  to  the
   market investigation indicated that for each different application it is necessary to have a special formulation of UPR[5], suppliers that are
   focused on customers from certain industries could easily adopt their production to start supplying UPR for other industries as well.[6]

17. As regards the substitutability between UPR and other resins / chemical compounds, respondents to the  market  investigation  indicated  that
   UPR are not substitutable with other resins / chemical compounds for the same intended use.[7]

18. The evidence gathered during the market investigation indicates that customers (UPR purchasers) can switch between  different  UPR  suppliers
   once they have been approved by the customers. The approval process consists of technical tests (sampling inspection) to ensure  the  required
   quality. Indeed, the vast majority of customers responding to the market  investigation  indicated  that  they  purchase  UPR  from  different
   approved suppliers and have switched suppliers in the past, mainly due to performance, quality and price considerations.[8]

19. In the present case, the product market definition for UPR can be left open, as the proposed concentration does not raise serious  doubts  as
   to its compatibility with the internal market with respect to any plausible market definition.

III.2. Geographic market definition

20. The Commission has not previously defined the geographic market for UPR. The Notifying Party submits that the geographic market is  EEA  wide
   for several reasons. Firstly, the Commission has previously defined the geographic market  for  other  types  of  resins  as  being  EEA-wide.
   Secondly, due to special characteristics of the product, UPR cannot be transported over very large distances, which limits the possibility  of
   imports/exports into/from EEA. Additionally, the Notifying Party submits that the production of UPR  of  its  Italian  and  Polish  plants  is
   entirely sold within the EU.

21. Despite the moderate transport costs (between 2-10%), the respondents to the market investigation  indicated  that  there  are  some  product
   characteristics that impede UPR to be transported over long distances, mentioning in particular  product  stability,  temperature  conditions,
   sensitivity to humidity, UV exposure or shelf life.[9]

22. A majority of UPR suppliers that responded to the market investigation indicated the existence of imports  of  UPR  into  EEA.  However,  the
   amount of the imported UPR is no more than a small percentage of the total market.[10]

23. As regards the geographic area of their purchases, it appears from the  evidence  gathered  during  the  market  investigation  that  larger,
   globally active UPR customers prefer globally active UPR suppliers,  but  both  larger  and  smaller  UPR  customers  replied  in  the  market
   investigation that they source regionally. In other words, the supply for the European plants is purchased in Europe,  the  supply  for  North
   American plants is sourced in the US, etc. UPR suppliers are usually distributing their products throughout a given region. [11]

24. In the present case the geographic market definition for UPR can be left open as the proposed concentration does not raise serious doubts  as
   to its compatibility with the internal market with respect to any plausible geographic market definition.

III.3. Competitive assessment

25. According to the Notifying Party, the EEA market for UPR was worth EUR 990 million (equivalent to  603  kt)  in  2013.  The  combined  market
   shares of the Parties would reach  [20-30]% in value and [20-30]% in volume. Other important players on the market of UPR are  Reichhold  [10-
   20]% in value, Ashland [10-20]%, DSM [10-20]% and Scott Bader [5-10]%. Their market shares in volume are approximately the same  as  those  in
   value.

26. The Notifying Party submits that post-merger, the HHI index will be 1042 and the HHI delta will be less than 250 in  a  market  characterised
   by overcapacity. Moreover, there are numerous competitors on this market, some large integrated chemical groups (such as Reichhold, Ashland or
   DSM), and also numerous smaller producers. In total, 85 different suppliers are active on the UPR market in the EEA.

27. Furthermore, the Notifying Party argues that vertical integration is not a  pre-requisite  to  enter  in  this  market  and  there  are  many
   available sources of raw materials.

28. As regards switching, the Notifying Party argues that customers have strong countervailing purchase power, are not constrained  by  long-term
   or exclusive purchase agreements and have low switching costs. The customers that responded to the market investigation indicated that  indeed
   they are able to switch suppliers within a reasonable timeframe and without incurring  significant  costs.  In  fact,  UPR  customers  approve
   several suppliers and are then able to easily switch from one to any other such approved producers. In case a new supplier has to be approved,
   then technical tests (sampling inspections) are necessary. These tests depend on the industry/qualification of the customer, who would have to
   qualify the new product for each application. The time needed for approving  a  new  supplier  amounts  to  around  1  year  to  complete  the
   qualification process. However, it bears no significant costs.[12] It was also indicated by customers responding to the  market  investigation
   that they switched producers in the past due to price, performance and quality  issues.[13]  Moreover,  customers  responding  to  the  market
   investigation have confirmed that in case of a permanent 5-10% price increase in the price or UPR sold by the Parties  they  would  switch  to
   alternative suppliers.[14]

29. A majority of respondents to the market investigation indicated that there is overcapacity on the EEA market of UPR and it  is  not  expected
   that this situation changes in the next two years due to the crisis situation.[15] Moreover, the capacity utilisation rate is very low  around
   […]%.

30. The main barriers to entry in the UPR market seem to be the technical know-how, high capital  investment,  certification  process  and  brand
   recognition.[16] Nevertheless, in the last three years several  new  suppliers  entered  the  UPR  market  such  as  AOC,  Nord  Composite  or
   Galstaff.[17]

31. As regards closeness of competition, the UPR suppliers replying to the market investigation indicated that they do see the Parties  as  close
   competitors in this market, especially in France and Spain.[18] However, the evidence from the market investigation also revealed other strong
   players on the UPR market, among which DSM seems to be the market leader, followed by Reichold, Ashland and Scott Bader[19].

32. Taking into account the moderate presence of the Parties on the market for UPR,  the  existence  of  other  strong  players  that  appear  to
   continue exercising competitive constraints on the merged entity and the fact that customers could and would switch to other suppliers in case
   of a price increase and the confirmed recent entries in this market, the Commission takes the view that he proposed transaction would not give
   rise to serious doubts as to the compatibility of the notified concentration with the internal market.

IV.   CONCLUSION

33. 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]   Commission Consolidated Jurisdictional Notice under Council Regulation No 139/2004 on the control of concentrations between undertakings,
      OJ No C 95, 16.4.2008, p. 1, at para. 38 – 40.

[3]   According to the Notifying Party, the South-African Competition Authority defined a separate product market for UPR in a 2012 case.

[4]   Answers to question 3 of Q2 - Questionnaire to competitors.

[5]   Answers to question 11 of Q1 - Questionnaire to customers.

[6]   Answers to question 7 of Q2 - Questionnaire to competitors.

[7]   Answers to question 9 of Q1 - Questionnaire to customers.

[8]   Answers to questions 11 and 12 of Q1 - Questionnaire to customers.

[9]   Answers to question 11 of Q2 - Questionnaire to competitors.

[10]  Answers to question 12 of Q2 - Questionnaire to competitors.

[11]  Answers to question 13 of Q1 - Questionnaire to customers.

[12]  Answers to question 5  of Q2 - Questionnaire to competitors.

[13]  Answers to question 12 of Q1 - Questionnaire to customers.

[14]  Answers to question 24 of Q1 - Questionnaire to customers.

[15]  Answers to questions 14 and 15 of Q2 - Questionnaire to competitors and to question 21of Q1 - Questionnaire to customers.

[16]  Answers to question 16 of Q2 - Questionnaire to competitors.

[17]  Answers to question 21 of Q2 - Questionnaire to competitors.

[18]  Answers to question 17 of Q2 - Questionnaire to competitors and to question 17 of Q1 - Questionnaire to customers.

[19]  Answers to question 18 of Q2 - Questionnaire to competitors and to question 20 of Q1 - Questionnaire to customers.