CELEX: 32014M7232
Language: en
Date: 2014-05-21 00:00:00
Title: Commission Decision of 21/05/2014 declaring a concentration to be compatible with the common market (Case No COMP/M.7232 - CHARTERHOUSE / NUOVA CASTELLI) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

                                        Brussels, 21.5.2014
                                        C(2014) 3473final

                                        [pic]

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|                                                                   |To the notifying party                                                     |

Dear Sir/Madam,

Subject:    Case M.7232 - Charterhouse / Nuova Castelli
         Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1]

    1) On 16 April 2014, the European Commission received a notification of a proposed concentration pursuant to Article  4 of Council Regulation
       (EC) No 139/2004[2] by which Charterhouse Capital Limited Group ("Charterhouse", United Kingdom) intends to acquire within the meaning  of
       Article 3(1)(b) of Regulation 139/2004 control of the whole of Nuova Castelli S.p.A. (the "Target", Italy) and its subsidiaries, including
       Magyar Sajt Korlátolt Felelősségű Társaság (“Magyar Sajt”, Hungary), by way of purchase of shares  (the  "Transaction").  Charterhouse  is
       designated hereinafter as the "Notifying Party."

       THE PARTIES

    2) Charterhouse is a UK-based parent company of a group which provides equity capital and fund management services. Charterhouse  controls  a
       number of companies in a broad range of businesses in different sectors. Charterhouse controls,  among  others,  Elior  SCA  (“Elior”),  a
       French company mainly active in the foodservices industry and, in particular, in contract and concession catering.

    3) The Target is a manufacturer, processor and marketer of a wide array of Italian cheeses and dairy products to leading  retail  chains  and
       other food players around the world. The company’s core business is focused on branded,  premium  private  label  and  industrial  Italian
       P.D.O. (Protected Designation of Origin) cheese products, such as Parmigiano Reggiano, Grana Padano, Gorgonzola, Taleggio, Mascarpone  and
       other dairy and Italian specialty food products.

       THE OPERATION

    4) For the purpose of the Transaction, Charterhouse incorporated an investment vehicle in the  UK,  Wheel  Bidco  Limited  ("Wheel").  Before
       closing, Wheel will incorporate a further investment vehicle in Italy ("NewCo"), which will  acquire  the  entire  share  capital  of  the
       Target, net of its treasury shares (so-called azioni proprie). In turn, NewCo's capital will be held by Wheel with an 80% equity stake and
       by Villa Canali S.r.l. ("VC") - one of the Target's current shareholders - with a 20% equity stake.

    5) According to the transaction documents,[3] the acquisition of control by Charterhouse over the  Target  is  conditional  upon  the  latter
       acquiring the entire equity stake of Magyar Sajt and vice-versa. Magyar Sajt is currently wholly owned by Cheese Company  s.r.l.  ("Cheese
       Company"). To comply with this condition precedent, the Target will purchase an additional 80% equity stake in Cheese  Company.  Moreover,
       given that both the Target and Magyar Sajt are ultimately controlled by the Bigi family, the two transactions  involve  the  same  seller,
       i.e. the Bigi family, and the same acquirer, i.e. Charterhouse. For these reasons, the two transactions constitute a single  concentration
       within the meaning of Article 3(1) of Regulation 139/2004 in line with paragraphs 38 et seq. of  the  Consolidated  Jurisdictional  Notice
       ("CJN").

       THE CONCENTRATION

    6) The Notifying Party explains that the rights attached to VC's 20% stake in NewCo do not extend to  strategic  decisions  on  the  Target's
       business policy and do not go beyond the veto rights normally accorded to minority shareholders to protect their  financial  interests  as
       investors in the company, as per paragraph 66 of the CJN.

    7) In particular, the Target will be entitled to appoint only one director on NewCo's board of directors, all other directors being appointed
       by Wheel. While VC's director will also act as the chairman of the board of directors, this will not grant VC any power to  influence  the
       Target's business conduct […];[4] and […].

    8) Therefore, as a result of the Transaction, Charterhouse will acquire sole control over the Target  and  its  subsidiaries  in  the  cheese
       business. The Transaction therefore constitutes a concentration within the meaning of Article 3 (1) of the Merger Regulation.

       EU DIMENSION

    9) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million (EUR […] million for  Charterhouse
       and EUR […] million for the Target).[5] Each of them has an  EU-wide  turnover  in  excess  of  EUR  250  million  (EUR  […]  million  for
       Charterhouse and […] million for the Target), but they do not achieve more than two-thirds of their aggregate EU-wide turnover within  one
       and the same Member State.

   10) Therefore, the Transaction has an EU dimension within the meaning of Article 1(2) of Regulation 139/2004.

       RELEVANT MARKETS

   11) The proposed Transaction concerns the market for the production and sale of cheese, as well as the  market  for  contract  and  concession
       foodservices.

1 Cheese

1 Relevant product market

   12) In previous decisions,[6] the Commission considered segmenting the cheese market according to cheese categories:  (i)  spreadable  cheese;
       (ii) fresh cheese; (iii) soft cheese; (iv) semi-hard cheese; and (v) hard cheese. The Commission also  considered  segmenting  the  cheese
       market according to certain narrower cheese types (for example, Mozzarella), the type  of  presentation  (slice,  fixed  weight,  variable
       weight), type of milk used (for example, Mozzarella using different milks) and protected geographical status (for  example,  “appellations
       d’origine controlée”).

   13) According to the Notifying Party, the Transaction essentially relates to the following segments: (i) fresh cheese  (including  mozzarella,
       ricotta, mascarpone and similar products); (ii) soft cheese (including gorgonzola and similar products); (iii) semi-hard and  hard  cheese
       (including Parmigiano Reggiano, Grana Padano and similar products);  and  (iv)  fresh  dairy  desserts  (including  Tiramisù  and  similar
       products), in France, United Kingdom, Italy and Germany.

   14) In any event, the precise product market definition regarding the differentiation of cheese according to its type can be left open in this
       case, as no competition concerns arise under any plausible market delineation.

2 Relevant geographic market

   15) In previous decisions,[7] the Commission has defined the geographic scope of the cheese markets as national. This  is  because  of,  among
       other things, the existing differences in consumers’ choices, differences in prices and the presence of strong national trademarks.

2 Contract vs concession foodservices

1 Relevant product market

   16) In previous decisions,[8] the Commission considered that contract  foodservices  and  concession  foodservices  constituted  two  distinct
       product markets. This is because the conditions of competition in the two markets are different  (for  example,  barriers  to  entry  into
       concession foodservice were higher in terms of investment,  reputation  and  access  to  established  brands;  concession  contracts  were
       generally longer and prices to consumers higher; also whereas contract caterers compete only at the tendering stage, concession  caterers,
       whilst also subject to tendering, often faced competition from other outlets within the facility).

   17) Contract foodservice covers the preparation, presentation and delivery of food and beverage services to clients and their customers  where
       clients have chosen to outsource this activity on their premises. The client pays the contract caterer a fee  for  the  provision  of  the
       catering service and the food is often sold to consumers at subsidised prices. Contract catering  services  are  carried  out  in  various
       sectors, including business and industry (staff canteens in both public and private sectors), healthcare (hospitals,  nursing  homes)  and
       education (schools, universities).[9]

   18) Concession foodservice covers the provision of foodservice requirements to the public  in  travel  locations  such  as  airports,  railway
       stations, ferries, roadsides, retail related locations such as department stores and sports  stadia  and  leisure  venues.  The  principal
       purpose of the customer's visit in the travel location is not for the consumption of food or beverage but for an alternative purpose.  The
       contractor pays the location owner (client) a rent for the right to trade at the premises; the contractor's  income  is  sourced  entirely
       from sales made to the public.[10]

   19) The Commission has in the past also considered whether further segmentation of the market for concession foodservices by channels such  as
       airport, railway and motorway concession foodservices would be appropriate.[11]

   20) In any event, the exact product market definition can be left open in this case, as no competition  concerns  arise  under  any  plausible
       market delineation.

2 Relevant geographic market

   21) In past decisions,[12] the Commission defined the geographic market for concession and contract foodservice as having a national dimension
       because of, among other things, legislative differences (public procurement and labour laws), national preferences (in terms  of  quality,
       charging and prices) and strong differences with respect to in-house providing of feeding needs.

   22) In any event, the exact product market definition can be left open in this case, as no competition  concerns  arise  under  any  plausible
       market delineation.

       COMPETITIVE ASSESSMENT

1 Cheese

   23) The Transaction does not give rise to any horizontal overlaps, as none of the portfolio companies currently controlled by Charterhouse  is
       engaged in the production and sale of cheese in the EEA, where the Target is currently active. Some  vertical  relationships  may  however
       arise, as one of Charterhouse's portfolio companies, Elior, is active in the markets for contract and concession  foodservice,  which  are
       located downstream in relation to the production and sale of cheese.

   24) The Notifying Party considers that any such vertical relationship is purely hypothetical, since there is no existing supplier  /  customer
       relationship between Elior and the Target and this is unlikely to change in the future. This is because (i) this is a private  equity  and
       financing transaction, which will not affect the interests of intermediate and ultimate consumers; (ii)  the  Target's  sales  are  mainly
       devoted to customers in the large retail distribution sector […].

   25) In the light of the above and of the available evidence, the Commission considers that a vertical  relationship  between  the  Target  and
       Elior is unlikely. In any event, the paragraphs below provide a competitive assessment of any affected markets.

   26) The Target sells its dairy products mainly in France, Germany, Italy and  United  Kingdom,  […].  Elior  is  present  in  the  market  for
       concession foodservices only in France, Germany, Italy and Spain. For this reason, a vertical relationship between cheese  and  concession
       foodservices would only be conceivable in France, Germany and Italy.

   27) If for the sake of completeness the Commission were to retain a segmentation of the British cheese market by cheese type, the  Transaction
       would in principle also give rise to vertically affected markets in the United Kingdom. In  particular,  there  would  be  a  hypothetical
       vertical relationship between the segments for Mascarpone and  Gorgonzola,  where  the  Target  has  a  share  of  [30-40]%  and  [40-50]%
       respectively,[13] and contract foodservices, where Elior has a share of [5-10]%. However,  anticompetitive  effects  are  highly  unlikely
       because, beside Elior's small market share: (i) the Target has very modest sales in the United Kingdom[…]; (ii)  […]%  of  its  sales  are
       devoted to private label through the largest distribution retailers; (iii) the Target's own branded products have market shares lower than
       [0-5]%; (iv) in the United Kingdom, the Target sells its products […]; and (v) the Target's  competitors  represent  credible  alternative
       sources of supply for retailers, wholesalers and other foodservices operators. For these reasons, no competitive concerns can be expected.

   28) With regard to Germany, in the light of the information provided by the Notifying Party, the Target's market share in  the  cheese  market
       does not exceed [0-5]% in any plausible market segment, while Elior's market share in the concession foodservices is <1%.  Therefore,  the
       following paragraphs will focus on France and Italy.

   29)  In this regard, and in the light of the information provided by the Notifying  Party,  the  Transaction  gives  rise  to  two  vertically
       affected markets consisting of a vertical relationship between cheese and concession foodservices in France and  a  vertical  relationship
       between cheese and concession foodservices in airports in Italy.

1 France

   30) In France, the Target’s market share for cheese is below [0-5]% and does not exceed [20-30]% under  the  narrowest  possible  segment  and
       cheese type, i.e. Gorgonzola.[14] Elior’s market share in France is [40-50]% in the overall concession foodservices  market,  [50-60]%  in
       the segment for airports, [40-50]% in the segment for motorways and [30-40]% in the segment for railway stations. This relationship  gives
       rise to vertically affected markets in this country.

   31) The Transaction is however unlikely to cause any anticompetitive effects. First, the Target’s market share in France is relatively limited
       and insufficient to grant significant market power. Cheese markets in each EU Member States are highly fragmented, with  the  presence  of
       several global (such as Lactalis, Arla and others) or niche players (like the Target). Second, the Target’s competitors represent credible
       alternative sources of supply of cheese products for retailers, wholesalers and other foodservices operators. In the light  of  the  above
       the Commission considers that no input foreclosure is conceivable.

   32) With regard to Elior, the sourcing of cheese is a negligible part of its food requirements,  as  players  in  the  market  for  concession
       foodservices must purchase a wide array of products. Moreover, within a single country final consumers  generally  have  quite  harmonized
       preferences. This is particularly true in France, where loyalty to traditional French cheese makes any major change in Elior’s  purchasing
       patterns unlikely. The French market for concession foodservices also features important players such as Autogrill and  SSP  and  a  large
       variety of other outlets are also available for cheese  producers.  Finally,  Elior’s  market  share  should  not  be  overemphasized,  as
       concession services are subject to tendering. On the basis of the above, the Commission considers that  customer  foreclosure  is  equally
       unlikely.

2 Italy

   33) In Italy, the Target’s market share for cheese is below [0-5]% and does not exceed [0-5]% in any plausible market segment. Elior’s  market
       share in Italy is [10-20]% in the overall concession foodservices market, [50-60]% in the airports segment and  [0-5]%  in  the  motorways
       segment.[15] This relationship would give rise to a vertically affected market in this country in relation to the airports segment.

   34) The Transaction is however unlikely to cause any anticompetitive effects. According to the information provided by  the  Notifying  Party,
       the Target’s market share in Italy is very limited, less than 5% under any plausible segmentation, and insufficient to  grant  significant
       market power. On the basis of the above the Commission considers that no input foreclosure is conceivable. With regard to Elior, the  same
       reasoning set out for France applies mutatis mutandis to Italy. In addition, Elior’s market share should not  be  overemphasized,  airport
       concessions in Italy are subject to tendering and are generally awarded for a  duration  of  five  years,  without  automatic  renewal  or
       exclusive rights. In the light of the above the Commission considers that customer foreclosure is equally unlikely.

       CONCLUSION

   35) 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]   OJ L 24, 29.1.2004, p. 1 ("Regulation 139/2004").
[3]   The Transaction is governed by a Sale and Purchase Agreement and an Investment and  Quotaholders'  Agreement,  both  entered  into  by  the
      parties on 27 February 2014.
[4]   […].
[5]   Turnover calculated in accordance with Article 5 of the Merger Regulation.

[6]   Case COMP M.6722 Frieslandcampina / Zijerveld & Veldhuyzen And Den Hollander (2013); Case COMP M.6242  Lactalis  /  Parmalat  (2011);  Case
      COMP M.5046 Friesland / Campina (2008); and Case COMP M.4135 Lactalis / Galbani (2006).
[7]   Case COMP M.6242 Lactalis / Parmalat (2011); and Case COMP M.4135 Lactalis / Galbani (2006).
[8]   COMP M.4762 Autogrill / Alpha Airports Group (2007); and Cases COMP M.4202 Charterhouse / Elior (2006).
[9]   Case COMP M. 2373 Compass / Selecta (2001); Case COMP M.1972 Granada / Compass (2000); and Case COMP M.126 Accor / Wagon Lits (1992).
[10]  Case COMP M.4249 Abertis / Autostrade (2006); and Case COMP M.1972 Granada / Compass (2000).
[11]  For instance, in Case COMP M. 2639 Compass Restorama / Rail Gourmet / Gourmet Nova (2002), the Commission considered  the  segment  of  on-
      train foodservices.
[12]  Case COMP M. 2373 Compass / Selecta (2001); and Case COMP M.1972 Granada / Compass (2000).
[13]  The Notifying Party stresses that the weight of the Italian cheese segment in the United Kingdom  is  around  7.2%  of  the  total  British
      cheese market.

[14]  The Notifying Party stresses that the weight of the Italian cheese segments in France is around 4.7% of the  total  French  cheese  market.
      The Target market shares in the segment for Mozzarella is around [10-20]%, for Parmesan is around [10-20]% and for Mascarpone is around [10-
      20]%.
[15]  Elior's market presence in the segment for concession foodservices in railway stations in Italy is negligible.

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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.

                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE