CELEX: 31995M0563
Language: en
Date: 1995-03-17 00:00:00
Title: COMMISSION DECISION of 17/03/1995 declaring a concentration to be compatible with the common market (Case No IV/M.563 - British Steel / UES) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

Avis juridique important

|

31995M0563

COMMISSION DECISION of 17/03/1995 declaring a concentration to be compatible with the common market (Case No IV/M.563 - British Steel / UES) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 105 , 26/04/1995 P. 0007

 COMMISSION  DECISION of 17/03/1995 declaring a concentration to be compatible with the common market (Case No IV/M.563  - British  Steel / UES) according to Council Regulation  (EEC) No 4064/89  (Only the English text is authentic).  The  paper version of the decision is available through  the sales offices of the Office of Official Publications of  the European Communities PUBLIC VERSION MERGER PROCEDURE ARTICLE 6(1)(b) DECISION To the notifying party Dear Sirs, Subject :<ind> Case No IV/M.563  British Steel/UES <ind> <ind> Notification of 16.02.1995 pursuant to Article 4 of Council Regulation No 4064/89 1.<ind>  The proposed concentration involves the acquisition by British Steel plc (BS) of sole control of UES Holding Ltd (UES), a joint venture company in which it currently  has  a 64  % share holding. The remaining 36 % of UES's shares  are held by GKN plc (GKN) which will effectively sell its shares to  BS  for a cash consideration. This decision is concerned with  those  products which fall within the jurisdiction  of the EC Treaty and which represent about 40 % of the turnover of UES and a negligible percentage of BS's turnover. 2.<ind> After examination of the notification the Commission has  concluded that the proposed operation falls within  the scope  of  Council Regulation No 4064/89 and does  not  give rise  to  serious  doubts as to its compatibility  with  the common market and the EEA Agreement. I.<ind> THE PARTIES AND THE OPERATION 3.<ind> BS was created in 1988 by the privatisation  of  the British Steel Corporation whose business was vested  in  BS. BS  is  divided  into  three  principal  operating  business groupings:  British Steel Long Products  and  British  Steel Flat Products which manufacture steel products and sell both directly  to customers and through British Steel  Commercial and Distribution, which also processes and distributes steel products worldwide (including products produced outside BS). BS  also  controls  Avesta Sheffield AB  a  major  Community producer   of   stainless  steel   and   controls   or   has shareholdings   in   a  number  of  steel   production   and distribution companies in the Community and elsewhere. 4.<ind>  UES  is  a British company which holds  the  entire issued  share  capital of United Engineering Steels  Limited which  was formed in 1986 by the combination of BS's Special Steels  division  and the Brymbo steel  works  and  Forgings divisions  of  Guest Keen and Nettlefolds plc  ("GKN").  UES comprises  the  following  principal  businesses:  a   steel division,  a metal recycling operation, a forgings division, a cylinders division, a bright bar division and a specialist stockholding  operation. It also owns a number  of  overseas sales companies. 5.<ind>  Currently UES is jointly controlled by BS  and  GKN via  their  holdings of voting shares in the company  and  a shareholders agreement dated 1 August 1991. 6.<ind> [Deleted business secrets.] II.<tab> COMMUNITY DIMENSION 7.<ind>  The  operation  has  a  Community  dimension.   The worldwide  turnover of BS and UES in their  respective  last financial  years amounts to more than ECU 5000 million  (BS, 7315  million ECU; UES, 848 million ECU). The Community wide turnover  of each company exceeds ECU 250 million (BS,  5549 million ECU; UES 708 million ECU). The undertakings involved do  not  achieve  more than two thirds  of  their  aggregate Communitywide turnover within one and the same member  state (total  Community turnover 6257 million ECU of which  United Kingdom 3727 million ECU or 60%). III.<tab> CONCENTRATION 8.<ind> As a result of the operation BS will acquire control of  USL and directly and through USL control over 100  %  of the  shares  of  UES  and hence sole  control  of  UES.  The operation  therefore constitutes a concentration within  the meaning of Article 3 of the Merger Regulation. IV.<tab> COMPATIBILITY WITH THE COMMON MARKET <tab> Relevant Product Market 9.<ind> A large proportion about 60% of the turnover of  UES is made up of sales of ECSC steel products which do not fall to be considered under the Merger Regulation. Its other main products are : <ind> <ind> forgings <tab> <tab> bright bar <tab> <tab> cylinders. <ind>  It  also distributes both ECSC and non ECSC  products through its stockholding operations. 10.<ind>  British  Steel  itself  produces  none  of   these products.  It does however sell bright bar through  its  own distribution and stockholding companies. 11.<ind>  Each of these three EC products are  distinct  and there is no overlap either in their production or their use. The  relevant product markets are therefore the markets  for forgings,  bright  bar, cylinders and  the  market  for  the distribution  of  distribution of EC products,  in  practice this is the market for the distribution of bright bars. <ind> Relevant Geographic Market 12.<ind> Each of the four relevant product markets  must  be examined separately. 13.<ind>  From  an  economic  point  of  view  the  relevant geographic  market  for forgings, appears  to  be  at  least Western  Europe if not the world. Forgings of the type  made by UES are made to customer specifications and are generally unique  to that customer. The producer therefore provides  a sophisticated  service to its customers  who  are  typically large  multinational companies in the transport  industries, automobile,  trucks, aerospace. UES exported  31  %  of  its production in 1994, 19 % are going to Continental Europe. 14.<ind>  UES's produces high pressure cylinders  for  which the  major  customers are the compressed gas,  beverage  and security industries, companies such as BOC, Air Liquide  and Coca   Cola   which   purchase  internationally   and   have considerable buying power. UES is the largest United Kingdom producer  and exports over 65 % of its cylinder  production. The relevant market for these products would appear to be at least the Community 15.<ind> Bright bars are precision products made to national and    international   standards.   They    are    therefore substantially homogeneous with the product of  one  supplier being  easily  substituted  for another.  Imports  into  the United Kingdom accounted for over 20% of consumption,  while UES  which is the major United Kingdom producer exports over 37%  of  its output, mainly to Western Europe and  the  USA. Again  the  relevant  market appears  to  be  at  least  the Community. 16.<ind> The only significant EEC product distributed by UES and   BS   is  bright  bar.  The  effect  of  the   proposed concentration  must  be examined at two levels.  First,  the combined  effect  of  UES and BS's bright  bar  distribution operations   in  the  markets  where  they  both    operate. Secondly, the vertical effects of UES as a supplier  to  the bright bar distribution operations of BS. 17.<ind>  The  geographical market in which  a  given  steel stockholding  depot  operates  will  be  determined  by  the location  of  competing stockholders depots. There  is  also some  competition between stockholders and direct sales from producers.  Bright  bars  are  a  comparatively  high  value product, therefore transport costs are less important, and a given  depot  may  compete  over large  distances.  In  this situation   the   relevant  geographical  market   for   the distribution  of  bright bar may be  considered  to  be  the United Kingdom. 18.<ind>  Only UES produces bright bars so that  it  is  not necessary  to consider the effect of the proposed  operation on the manufacture of these products. <ind> Assessment 19.<ind>  BS produces none of the nonECSC products  made  by UES.  The  proposed operation therefore will not change  the competitive  position  with  regard  to  the  production  of forgings,  cylinders  and bright  bar.  The  shares  of  the European  market will remain the same at approximately  13%, 25% and 10% respectively. 20.<ind> UES produces nearly all the steel required  by  its forging,  cylinder  and  bright bar operations  in  its  own electric arc furnaces. Less than 3% of its requirements  are purchased from other producers and the bulk of this was from BS (including Avesta Sheffield). There will not therefore be any material foreclosure effects on upstreamsuppliers. 21.<ind> There is an overlap in stockholding. Both  UES  and BS  sell bright bars through their stockholding arms.  Of  a total  market  of 180,000 tonnes of bright bar sold  through stockholders  in the United Kingdom, stockholders  belonging to UES sold 17,500 tonnes in 1993 and those controlled by BS 3,500  tonnes. The total amounts to 21,000 tonnes  or  about 12%.  UES has no stockholding operations outside the  United Kingdom. 22.<ind> BS purchases almost all its requirements of  bright bar  from  UES  so there will be no effect on  the  upstream supply of this product. 23.<ind>  In  view of the market shares resulting  from  the concentration  and  the  structure of  the  various  markets concerned,  the  operation will not create or  strengthen  a dominant  position  such as to impede effective  competition with   regard  to  the  products  which  come   within   the jurisdiction of the Merger Regulation. V.<ind> ANCILLARY RESTRAINTS 24.<ind> The Share Sale and Purchase Deed requires GKN, with certain  exceptions not to compete with UES  in  the  United Kingdom  for a period of [Deleted business secrets.]  years. This  condition  is directly related and  necessary  to  the implementation  of  the  concentration  and  is,  therefore, ancillary within the meaning of the regulation. 25.<ind>  For the above reasons the Commission  has  decided not  to  oppose  the notified operation and  to  declare  it compatible  with the common market and with the  functioning of   the   EEA  Agreement.  This  decision  is  adopted   in application  of  Article 6(1)(b) of  Council  Regulation  No 4064/89. For the Commission,