CELEX: 32021M10284
Language: en
Date: 2021-08-11 00:00:00
Title: Commission Decision of 11/08/2021 declaring a concentration to be compatible with the common market (Case No COMP/M.10284 - KPS / CROWN EUROPEAN TINPLATE) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                 Brussels, 11.08.2021
                                                                 C(2021) 6071 final
                                                                                  PUBLIC VERSION
                                                                  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                                                                  information omitted has been replaced by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.
                                                                 KPS Capital Partners, LP.
                                                                 One Vanderbilt Avenue, 52nd Floor
                                                                 New York, NY 10017
                                                                 USA
Subject:             Case M.10284 – KPS / Crown European Tinplate
                     Commission decision pursuant to Article 6(1)(b) of Council Regulation
                     No 139/20041 and Article 57 of the Agreement on the European Economic
                     Area2
Dear Sir or Madam,
(1)       On 15 July 2021, the European Commission received notification of a proposed
          concentration pursuant to Article 4 of the Merger Regulation by which KPS Capital
          Partners, LP (‘KPS’) intends to acquire sole control over Crown Holdings, Inc.’s
          Food, Aerosol and Promotional Packaging business in Europe, Middle East and
          Africa (‘Crown European Tinplate’, and, together with KPS, the ‘Parties’) (the
          ‘Transaction’).3
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 1, 3.1.1994, p. 3 (the ‘EEA Agreement’).
3     Publication in the Official Journal of the European Union No C292, 22.07.2021, p. 4.
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak--- 1.       THE PARTIES
(2)      KPS is an equity investment fund active across a diverse array of industries,
         including basic materials, branded consumer, healthcare and luxury products,
         automotive parts, capital equipment and general manufacturing. KPS recently
         acquired the aluminium flat rolled products business of Norsk Hydro ASA (‘Hydro
         Rolling’), including its activities in the production and supply of aluminium sheet for
         food cans.
(3)      Crown European Tinplate is active in the design, manufacture and sale of packaging
         products for consumer goods including the following: aerosol and food cans and
         ends, metal closures and promotional packaging.
2.       THE OPERATION
(4)      On 8 April 2021, the Parties entered into a shares purchase agreement by means of
         which KPS will acquire 80% of the shares of Crown European Tinplate. Crown
         Holdings, Inc. will retain a non-controlling 20% of Crown European Tinplate. On
         the basis of the above, the Transaction constitutes an acquisition of sole control over
         part of an undertaking, within the meaning of Article 3(1)(b) of the Merger
         Regulation.
3.       UNION DIMENSION
(5)      The undertakings concerned have a combined aggregate world-wide turnover of
         more than EUR 5 000 million4 in 2020 (KPS: EUR […] million; Crown European
         Tinplate: EUR […] million) and the aggregate Union-wide turnover of each of the
         two undertakings concerned is more than EUR 250 million (KPS: EUR […] million;
         Crown European Tinplate: EUR […] million). The undertakings concerned do not
         achieve more than two-thirds of their Union-wide turnover within the same Member
         State.
(6)      Therefore, the Transaction has a Union dimension pursuant to Article 1(2) of the
         Merger Regulation.
4.       M ARKET DEFINITION
4.1.     Aluminium sheet for food cans (upstream)
(7)      In past decisions regarding the production and supply of aluminium flat rolled
         products (‘FRPs’)5 , the Commission has considered aluminium sheet for food cans
         as a distinct product market from other categories of FRPs on the basis that
         substitution is not possible from either the supply-side or the demand-side
         perspective. In addition, the Commission has considered that the geographic scope
4    Turnover calculated in accordance with Article 5 of the Merger Regulation.
5    Cases M.4605 Hindalco/Novelis, paragraph 13, M. 3225 Alcan /Pechiney (II), paragraph 65 and M.2702
     Norsk Hydro/VAW, paragraph 12.
                                                           2
 ---pagebreak---           of the markets for the supply of FRPs, including for aluminium sheet for food cans,
          covers at least the EEA (plus Switzerland)6 .
(8)       The Notifying Party submits that the exact product and geographic scope of the
          production and supply of aluminium sheet for food cans can be left open, but
          considers that the market could be assessed in line with previous Commission
          practice7 .
(9)       In line with previous practice and for the purpose of this Decision, the Commission
          will consider the EEA and Swiss market8 for the production and supply of
          aluminium sheet for food cans in its assessment.
4.2.      Metal food cans (downstream)
(10)      In the past9 , the Commission has found that metal food cans constitute a separate
          product market from beverage cans and from other glass or plastic food containers.
(11)      In addition, the Commission has considered that separate markets potentially exist
          for metal food cans based on (i) metal type (tinplate and aluminium); and (ii) can
          type. Regarding can type, the Commission has considered the possibility to make a
          distinction between 3-piece cans and 2-piece cans10 . 2-piece cans are produced
          through two main technologies: draw and redraw (‘DRD’); and draw and wall
          ironing (‘DWI’). Ultimately, based on lack of substitutability from the demand side
          perspective, the Commission considered in the past that it is likely that there are
          separate product markets for (i) tinplate versus aluminium food cans, (ii) 3-piece
          versus 2-piece food cans, and (iii) 3-piece and DWI 2-piece food cans as opposed to
          DRD 2-piece food cans. However, the question of whether or not these various sub-
          segments of metal food cans constitute separate product markets was ultimately left
          open11 .
(12)      For the purpose of this Decision, the Commission will consider that there is a
          separate product market for metal food cans, as the market investigation did not
          reveal any reasons to depart from the product market definition followed by the
          Commission in previous cases. As regards the further possible segmentations set out
          above, ultimately, the exact product market definition can be left open, because the
          Transaction does not raise serious doubts as to its compatibility with the internal
          market under any plausible market definition.
(13)      The Parties submit that the precise geographic market can be left open. For the
          purposes of this notification, however, they suggest that the geographic scope is
          likely to be EEA-wide, primarily because aluminium food cans can be transported
          over relatively long distances and at relatively low cost.
6    Case M.4605 Hindalco/Novelis, paragraph 13.
7    Form CO, paragraphs 115-117.
8    For the avoidance of doubt, for the rest of this decision when EEA is mentioned, this includes the EEA
     and Switzerland.
9    Case M.7104 Crown/Mivisa, paragraph 10.
10 3-piece cans are composed of a cylindrical body to which a bottom lid and a top lid (can ends) are
     attached and assembled through a welding process. 2-piece cans have a top lid (can end) and a seamless
     body, of which the bottom is an integral part, with a typically rectangular or round base.
11 Case M.7104 Crown/Mivisa, paragraph 29.
                                                             3
 ---pagebreak--- (14)      In the past12 , the Commission has held that the geographic scope of the market(s)
          related to aluminium food cans is at least national and/or cross border regional (but
          not EEA-wide), while ultimately leaving the geographic market definition open. The
          Commission observed that the maximum distances of actual purchases by customers
          were generally below 600 km from their facilities (and for some regions customers
          source from distances that do not exceed 400 km).
(15)      In the present case, the question whether the geographic scope of the market(s) at
          issue is national or cross-border regional can be left open, because the Transaction
          does not raise serious doubts as to its compatibility with the internal market under
          any plausible market definition.
5.        COMPETITIVE ASSESSMENT
5.1.      Introduction and market shares
(16)      The potential product market(s) for tinplate food cans are not relevant to the
          Transaction, as there is no horizontal or vertical relationship between the Parties’
          activities in this regard. Moreover, in the production of food cans, aluminium sheet
          is only used in the production of 2-piece DRD food cans. Therefore, for the purpose
          of this Decision, the competitive assessment will focus on the impact of the
          Transaction with regard to aluminium 2-piece DRD food cans, which is the only area
          in respect of which a vertical link with KPS’ activities can be identified. As to the
          geographic scope for the supply of aluminium 2-piece DRD food cans, the
          Commission will consider both (i) national and (ii) cross-border regional markets, in
          line with the above conclusion on geographic market definition.
(17)      KPS (through Hydro Rolling) is active in the EEA market for the production and
          supply of aluminium sheet for food cans. Crown European Tinplate is active in the
          downstream production and supply of aluminium 2-piece DRD food cans:
            a. in Croatia, France, Germany, Greece, Italy, Poland, Portugal, Slovenia, Spain;
                and
            b. in four cross-border regions in Europe13 : (i) Portugal, Spain and Southern
                France; (ii) Benelux, Northern France and Western Germany;; (iii) Italy,
                Austria, Bulgaria, Croatia, Greece, Germany, Romania, Slovenia and Southern
                France; and (iv) Poland, Czech Republic, Denmark, Eastern Germany, Latvia,
                Lithuania, Slovakia and Sweden.
(18)      The following table shows Hydro Rolling’s and its competitors’ EEA market shares
          in the supply of aluminium sheet for food cans:14
12   Case M.7104 Crown/Mivisa, paragraphs 55 and 56.
13   For the purpose of this case, the regions represent the radius around Crown European Tinplate’s facilities
     that better reflects the actual distance travelled by cans produced at the respective facility.
14 The market has been reconstructed following information gathered from market players during pre -
     notification.
                                                              4
 ---pagebreak---  ---pagebreak---  ---pagebreak---          aluminium food can sheet production volumes compared to Crown European
         Tinplate's demand]. Lastly, the Parties argue that this is a private equity transaction
         rather than vertical integration in the traditional sense. In this context, the Parties
         submit that KPS’ portfolio companies are managed separately from each other, and
         the aim will be to maximise performance for each of the portfolio companies and
         therefore returns to investors. Therefore, the Parties argue that there would be no
         reason to forgo sales in one of the relevant markets in order to maximise sales in the
         other and, arguably, any such strategy would not even be possible given two sets of
         independent management.17
5.3.     The Commission’s assessment
5.3.1. Legal framework for the assessment
(23)     Under Article 2(2) and (3) of the Merger Regulation, the Commission must assess
         whether a proposed concentration would significantly impede effective competition
         in the internal market or in a substantial part of it, in particular through the creation
         or strengthening of a dominant position. In this respect, a merger can entail
         horizontal and/or non-horizontal effects.
(24)     As regards non-horizontal effects, the Commission Non-Horizontal Merger
         Guidelines18 distinguish between the effects of vertical mergers, which involve
         companies operating at different levels of the supply chain, and of conglomerate
         mergers, which involve companies that are active in closely related markets.
(25)     According to paragraph 29 of the Non-Horizontal Merger Guidelines, a vertical
         merger is said to result in foreclosure where actual or potential rivals' access to
         supplies or markets is hampered or eliminated as a result of the merger, thereby
         reducing these companies' ability and/or incentive to compete.
(26)     Paragraph 30 of the Non-Horizontal Merger Guidelines distinguishes two forms of
         vertical foreclosure. The first is where the merger is likely to raise the costs of
         downstream rivals by restricting their access to an important input (input
         foreclosure). The second is where the merger is likely to foreclose upstream rivals by
         restricting their access to a sufficient customer base (customer foreclosure).
(27)     The present Section 5.3 assesses whether the Transaction is likely to raise vertical
         effects on the affected markets identified in Section 5.1.
5.3.2. Input foreclosure
(28)     The Commission considers that, post-Transaction, the Parties are unlikely to have
         the ability or the incentive to engage in an input foreclosure strategy by restricting
         competitors’ access to an important input. Moreover, any hypothetical input
         foreclosure strategy from the Parties would be unlikely to have an impact on
         effective competition. This is for the following reasons.
17   Form CO, paragraphs 89-90.
18   Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the contro l of
     concentrations between undertakings (‘Non-Horizontal Merger Guidelines’) (2008/C 265/07).
                                                        7
 ---pagebreak--- 5.3.2.1. Lack of ability to foreclose competitors downstream
(29)     First, it is unlikely that the Notifying Party has sufficient market power upstream to
         be able to engage in an input foreclosure strategy. This is because Hydro Rolling has
         a limited market share in the EEA market for aluminium sheet for food cans
         ([5-10]% or [10-20]%) and there are several alternative suppliers, including larger
         players (in sales volume) such as Elval, Novelis or Constellium.
(30)     Second, concerns raised by some can producers19 during the market investigation
         with regard to a lack of capacity in the upstream EEA market for aluminium sheet
         for food cans are not supported by available evidence.
(31)     While the Parties have not been able to provide upstream competitors’ capacity
         figures, the Commission engaged in a market reconstruction based on actual capacity
         and production data of the Parties’ main competitors. The results of the market
         reconstruction show that there is ample spare capacity in the market.
(32)     The market reconstruction conducted by the Commission indicates that there would
         be at least 100 kilotons of spare capacity in the market (without Hydro Rolling’s
         capacity). This exceeds the total annual demand of around 78 kilotons (2020). It
         follows that there is sufficient available capacity in the upstream market for food can
         manufacturers to switch suppliers in case the merged entity would consider
         restricting their access to its aluminium sheet for food cans.
(33)     Overall, given the limited market position of the Notifying Party upstream, the
         number of credible alternative suppliers, the merged entity would likely have only
         limited ability to engage in an input foreclosure strategy post-Transaction.
5.3.2.2. Lack of incentive to foreclose competitors downstream
(34)     First, most of Crown European Tinplate’ demand of aluminium food can sheet is for
         [alloy types] that are currently not produced by Hydro Rolling20 . Hydro Rolling
         would need to carry out a significant capex investment (hundreds of EUR million) to
         produce aluminium food can sheet using alloy [alloy type].21
(35)     Second, Hydro Rolling has not supplied aluminium sheet to Crown European
         Tinplate for over […]22 . The market investigation showed that in order to supply a
         food can manufacturer, an aluminium producer has to go through an extensive
         qualification process that can last up to 18 months and includes a test with final
         customers’ products23 . Therefore, the incentive for the merged entity to engage into
         input foreclosure would be limited by the cost and time necessary to try to qualify
         with Crown European Tinplate’s food can customers.
19  Minutes of calls with customers on 6 and 8 July 2021.
20  [50-60]% and [40-50]% of Crown European Tinplate’s demand is for [alloy types] alloys, respectively.
    Hydro Rolling does not produce [alloy type] alloy and produces only a very small amount of [alloy type]
    alloy. In the last 18 months, a total of […] tons of [alloy type] alloy was supplied to the food can market by
    Hydro Rolling while Crown European Tinplate’s demand for [alloy type] alloy in 2020 was […] tons.
21 Form CO, paragraph 83.
22 Form CO, paragraph 158.
23 Minutes of a call with a competitor on 13 July 2021.
                                                             8
 ---pagebreak--- (36)    Third, the Notifying Party submits that the manufacture of aluminium food can
        sheet is less commercially attractive than that of other aluminium FRPs 24 . In fact,
        less than [0-5]% of Hydro Rolling’s total output in 2020 is attributable to aluminium
        sheet for food cans25 . In addition, in 2019, Hydro Rolling even sold the equipment to
        produce coated aluminium foil for certain stand-alone can end-products26 . In this
        regard, Hydro Rolling estimates that its production of aluminium food can sheet will
        remain stable even if demand grows in the next years27 . This suggests that
        aluminium food can sheet is [Hydro Rolling's product strategy for aluminium food
        can sheet] to justify the investment and qualification effort needed to start supplying
        Crown European Tinplate.
(37)    In conclusion, given Hydro Rolling's preference for [Hydro Rolling's product
        strategy for aluminium FRPs] and the substantive investments required to be able to
        supply the type of aluminium food can sheet mainly used by Crown European
        Tinplate, the merged entity would likely have a limited incentive to engage in an
        input foreclosure strategy post-Transaction.
5.3.2.3. Lack of impact on effective competition
(38)    Given the likely absence of ability and incentive to foreclose Crown European
        Tinplate’s competitors, it also seems unlikely that a foreclosure strategy could lead
        to any anticompetitive effects if implemented.
(39)    Moreover, in the event that Hydro Rolling would turn its supplies of aluminium food
        cans to Crown European Tinplate, the latter’s suppliers of aluminium sheet for food
        cans could in turn supply Hydro Rolling’s current customers. Indeed, the market
        investigation revealed that most food can producers currently have more than one
        qualified supplier of food can sheet. In this regard, the majority of the Parties’
        upstream and downstream competitors that expressed a view in the market
        investigation expect minimal or no impact of the Transaction on the supply of
        aluminium food can sheet to aluminium can producers28 .
5.3.3. Customer foreclosure
(40)    The Commission considers that, post-Transaction, the Parties are unlikely to have
        the ability or the incentive to engage in a customer foreclosure strategy. Moreover,
        any hypothetical customer foreclosure strategy from the Parties would be unlikely to
        have an impact on competition. This is for the following reasons.
(41)    First, despite Crown European Tinplate’s high market shares in certain geographies,
        there are many other aluminium 2-piece DRD food can producers in the EEA
        besides Crown European Tinplate, like Trivium, Envases Universales, Massilly and
        Silgan as well as other smaller producers29 . Even though some of Hydro Rolling’s
24  To maximize profit, Hydro Rolling produces a mix of aluminium FRPs in its rolling mills .
25  Form CO, paragraph 85.
26  Form CO, paragraphs 79, 81 and 175.
27  Form CO, paragraph 171-172.
28  Responses from Hydro Rolling’s competitors received on 01.07.2021, 07.07.2021 and 08.07.2021 to the
    Commission’s request for information sent on 28.06.2021. Responses from Hydro Rolling’s customers
    received on 01.07.2021 and 02.07.2021 to the Commission’s request for information sent on 28.06.2021.
29  Form CO, paragraph 186.
                                                        9
 ---pagebreak---         competitors were concerned30 about losing Crown European Tinplate as a customer
        post-Transaction, several aluminium sheet suppliers contacted during the market
        investigation stated that there are alternative aluminium 2-piece DRD food can
        producers in the EEA to which they can sell their aluminium sheet.31 Considering an
        upstream market for the supply of aluminium sheet for food cans that is EEA-wide
        (plus Switzerland), producers upstream could serve customers in a different (national
        or cross-border regional) geography. In this regard, the time that Crown European
        Tinplate would require to qualify Hydro Rolling’s products could be used by other
        aluminium can sheet producers to have their products qualified by new customers.
(42)    Second, the majority of Hydro Rolling’s competitors contacted during the market
        investigation were not concerned about the potential impact of the Transaction on
        their business or more broadly on the market32 .
(43)    Third, in any event, even if Hydro Rolling would turn all its aluminium can sheet
        production to Crown European Tinplate, the latter would still source at least [50-
        60]% of its needs of aluminium food can sheet from other producers (for alloy [alloy
        type], for the reasons stated in paragraph (33) above).33
(44)    In view of these considerations, the Commission concludes that it is unlikely that
        customer foreclosure concerns will arise from the Transaction.
5.3.4. Conclusion of the Commission’s assessment
(45)    In light of the above considerations and of all evidence available to it, the
        Commission considers that the Transaction does not give rise to serious doubts as to
        its compatibility with the internal market or the functioning of the EEA Agreement
        due to vertical non-coordinated effects under any plausible market definition.
6.      CONCLUSION
(46)    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 and Article 57 of the EEA Agreement.
                                                             For the Commission
                                                             (Signed)
                                                             Margrethe VESTAGER
                                                             Executive Vice-President
30  Responses from the Parties’ competitors received on 07.07.2021 and 08.07.2021 to the Commission’s
    request for information sent on 28.06.2021.
31 Responses from the Parties’ competitors received on 01.07.2021, 07.07.2021 and 08.07.2021 to the
    Commission’s request for information sent on 28.06.2021.
32 Responses from the Parties’ competitors received on 07.07.2021 and 08.07.2021 to the Commission’s
    request for information sent on 28.06.2021.
33 Form CO, paragraph 160.
                                                        10