CELEX: 32013M6982
Language: en
Date: 2013-11-29 00:00:00
Title: Commission Decision of 29/11/2013 declaring a concentration to be compatible with the common market (Case No COMP/M.6982 - ALTOR FUND III  / TRYGHEDSGRUPPEN / ELIXIA / HFN GROUP) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

                                        Brussels, 29/11/2013
                                        C (2013) 8313 final

                                        [pic]

|To the notifying parties:                                                                                                      |              |

Dear Sir/Madam,

Subject:    Case No COMP/M.6982 - ALTOR FUND III/ TRYGHEDSGRUPPEN/ ELIXIA/ HFN GROUP
         Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1]

    1) On 28 October 2013, the European Commission received a notification of a proposed concentration  pursuant  to  Article  4  of  the  Merger
       Regulation by which the undertakings Altor Fund III  ("Altor Fund", Jersey) and TryghedsGruppen smba ("TG", Denmark)  acquire  within  the
       meaning of Article 3(1)(b) of the Merger Regulation joint control of the undertakings Elixia Holding III AS ("Elixia", Norway), previously
       controlled by Altor Fund, and Health & Fitness Nordic AB ("HFN", Sweden), previously controlled by TG, by way of purchase of shares  in  a
       newly created company constituting a joint venture ("the Transaction").

    2) Elixia and HFN are collectively referred to as "Parties"; Altor Fund and TG are here collectively referred to as the "Notifying Parties".

    3) By reasoned submission of 26 September 2013, the Notifying Parties had requested in accordance with Article 4(4) of the Merger  Regulation
       and Article 6 of Protocol 24 to the EEA Agreement that the Transaction be referred to the competent Finnish and Norwegian  authorities  as
       regards respectively the Finnish and the Norwegian parts of the transaction. Following the agreement of Finland and Norway to the referral
       request, on 23 October 2013, the Commission adopted a decision referring the assessment of the effects of the Transaction on the  relevant
       markets in Finland to the Finnish Competition Authority, and the assessment of the effects of the Transaction on the relevant  markets  in
       Norway to the Norwegian Competition Authority.

    4) Therefore, only the remainder of the Transaction, which concerns Sweden and Denmark, will be assessed by the Commission.

       THE PARTIES

    5) Altor Fund and TG are both private equity funds.

    6) Elixia is a Nordic fitness club operator with its main activities in Norway. Elixia operates in total  59  fitness  clubs:   42  clubs  in
       Norway, 14 in Finland and 3 in Sweden.

    7) HFN is a fitness club operator active in Denmark, Finland, Norway and Sweden, and with its centre  of  gravity  in  Sweden.  HFN  operates
       through two main brands – SATS and Fresh Fitness, as well as through the Metropolis brand in Stockholm. In total HFN operates  135  clubs:
       63 clubs in Sweden, 51 in Norway, 10 in Finland and 11 in Denmark.

       THE OPERATION

    8) The Transaction in question involves the acquisition of joint control by Elixia Holding IV AS  ("Elixia  IV"),  ultimately  controlled  by
       Altor Fund, and TG over Elixia and HFN. The Transaction will be carried out by Elixia IV contributing its shares and shareholder loans  in
       Elixia, and TG its shares in HFN, to a newly-created company, HFN Group AS. After the Transaction, Elixia IV will own 51% of the shares in
       HFN Group AS and TG will own the 49% remaining shares.

    9) According to the Shareholders' Agreement entered into by Elixia IV and TG on 12 July 2013, Altor Fund and TG will each nominate two  board
       members in HFN Group AS. In addition, they will nominate two independent board members jointly. No board member has a casting vote, and no
       board matters can be referred to the shareholders' meeting for decision. Finally, board decisions  are  made  by  simple  majority.  Thus,
       through the transaction, Altor Fund and TG will jointly control HFN Group AS.

   10) The Transaction therefore constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

       EU DIMENSION

   11) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million[2] (Altor Fund: EUR  […]  million;
       TG: EUR […] million). Each of them has an EU-wide turnover in excess of EUR 250  million  (Altor  Fund:  EUR  […]  million;  TG:  EUR  […]
       million), but they do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State.

   12) The Transaction therefore has an EU dimension within Article 1(2) of the Merger Regulation.

       MARKET DEFINITION

   13) Elixia and HFN are both active in the operation of fitness clubs in Sweden. There is no overlap in  Denmark  as  only  HFN  is  active  in
       Denmark.

   14) Therefore, the Commission's analysis focuses on the markets for the operation of fitness clubs in Sweden.

1 Product market

   15) The Notifying Parties submit that the relevant product market is the operation of local fitness clubs.

   16) The services offered by the fitness clubs range from individual weight lifting/strength or cardio training in  the  gym  to  a  vast  time
       schedule of group exercise classes. In high-end clubs, additional services such as lounge area, swimming pool, tanning salon,  saunas  and
       steam room, child care, complimentary breakfast and car parking are also offered.

   17) The Notifying Parties argue that this market comprises both privately-owned clubs and publicly-owned clubs and that no further distinction
       is to be made within this market. According to the Notifying Parties, in fact, in the Nordic countries, most publicly-owned fitness  clubs
       offer the same or similar services as privately-owned clubs, based on a monthly fee; vice versa,  several  privately-owned  fitness  clubs
       also offer a pay-per-visit structure. Moreover, the Notifying Parties stress that, rather than a distinction based on price or  facilities
       offered, location is one of the main factors for a customer to take into account when choosing a fitness club.

   18) In a previous case, while ultimately leaving the exact product  market  definition  open,  the  Commission  indicated  that  publicly  and
       privately-owned fitness clubs would form two distinct markets, mainly due to differences in price structure and facilities offered. [3]

   19) In Bridgepoint, the Commission also considered a further segmentation of the market based on cost or facilities,  although  it  ultimately
       left open the exact market definition, noting that "a further distinction within a market for privately owned fitness clubs according  to,
       on the one hand, cost or, on the other hand, facilities [would be] difficult to make".[4]

   20) In the present case, the exact product market definition can be left open as the  Transaction  does  not  give  rise  to  any  competition
       concerns under all alternative product market definitions.

2 Geographic market

   21) The Notifying Parties take the view that the geographic scope of the market(s) for the operation  of  fitness  clubs  would  naturally  be
       larger than isochrones equalling a journey of 15 minutes walking distance around each club. This is due to increased mobility in  general,
       but also because the Nordic countries are more sparsely populated than continental Europe, making private cars a more  important  mode  of
       transportation.

   22) In Bridgepoint, while leaving open the exact geographic market definition, the Commission identified  the  narrowest  possible  geographic
       market to be catchment areas between fitness clubs equalling a journey of 15 minutes on foot.

   23) In the present case, the exact geographic market definition can be left open as the Transaction does not  give  rise  to  any  competition
       concerns under all alternative geographic market definitions.

       COMPETITIVE ASSESSMENT

   24) The activities of the Parties overlap in the markets for the operation of fitness clubs in Sweden, more precisely  in  Gothenburg  and  in
       Sundbyberg.

1 Horizontal markets

   25) The Notifying Parties submit that market share should be calculated based on the number of clubs (as  opposed  to  number  of  members  or
       turnover). The Notifying Parties argue that the market shares based on  the  number  of  clubs  provide  the  most  realistic  picture  of
       competition in the fitness market: the number of members at one club will not be a factor that customers take into account  when  choosing
       their local club. Rather, what exerts pressure is the composition and state of the clubs in any given local area. Moreover, market  shares
       based on turnover figures would be even more difficult to calculate, mainly due to variations in the clubs' pricing policies and  possible
       rebate structures. However, the Notifying Parties have submitted figures for market shares calculated based on both the  number  of  clubs
       and the number of members.

       1 Gothenburg

|                                         |Combined market share                    |Combined market share (number of members)|
|                                         |(number of clubs)                        |                                         |
|City of Gothenburg                                                                                                           |
|Privately and publicly-owned clubs       |10.8%                                    |[…]%                                     |
|Privately-owned clubs only               |12.5%                                    |[…]%                                     |
|Privately-owned high-end clubs           |<25%                                     |<25%                                     |
|Isochrones – SATS Kungsgatan                                                                                                 |
|Privately and publicly-owned clubs       |16.7%                                    |[…]%                                     |
|Privately-owned clubs only               |<25%                                     |[…]%                                     |
|Privately-owned high-end clubs           |<25%                                     |<25%                                     |
|Isochrones – Elixia Masthugget                                                                                               |
|Privately and publicly-owned clubs       |10%                                      |[…]%                                     |
|Privately-owned clubs only               |<25%                                     |[…]%                                     |
|Privately-owned high-end clubs           |<25%                                     |<25%                                     |

                                                    Source: Notifying Parties' estimate (2012)

1 City of Gothenburg

   26) The Notifying Parties submit that there are more than 100 fitness clubs in Gothenburg (with approximately […] members in total). Moreover,
       the Parties face strong competition from many fitness clubs, due to the location of competing clubs. Finally, they stress that entry  into
       the market is easy since several openings have occurred in the last five years.

   27) The Transaction does not give rise to any affected markets on the possible markets in Gothenburg  for  (i)  publicly  and  privately-owned
       clubs, and (ii) privately-owned clubs only, where the Parties' combined market share is below 15%.

   28) On the possible narrower product market for privately-owned high-end clubs in Gothenburg, the Parties'  combined  market  share  does  not
       exceed 25% (both in number of clubs or number of members).

   29) Furthermore, the Commission notes that the merged entity will continue to face competition from numerous fitness clubs. The Parties'  main
       competitors are privately-owned, high-end clubs: Nordic Wellness (market share over [30-40]% - in number of members), Life  (market  share
       over [5-10]%), Actic, Curves and Itrim (together, market share over [5-10]%).

   30) Finally, the entry barriers indeed do not seem high and the market is very dynamic with numerous  players,  since  during  the  last  five
       years, there have been 28 club openings in Gothenburg. For example, both Nordic Wellness  (high-end  club)  and  Fitness24Seven  (low-cost
       club) opened ten new clubs each.

2 Isochrones

   31) The Notifying Parties submit that the Transaction does not give rise to any competition  concerns  in  Gothenburg  also  when  considering
       narrower geographic markets of isochrones equalling a journey of 15 minutes walking distance around each club. This is because there is  a
       myriad of overlapping catchment areas, resulting in a continuous chain of substitution linking all fitness clubs in  Gothenburg.  However,
       the Notifying Parties provided market shares on the narrowest possible market definition,  which  is  isochrones  of  15  minutes  walking
       distance around each club. Even under this market definition,  the  Notifying  Parties  claim  that  the  Transaction  will  not  restrict
       competition as a high number of competitors (around 18-20 clubs) will remain active in each isochrone.

   32) Under such narrower market definition the Transaction leads to two affected markets in Gothenburg: the  SATS  Kungsgatan  and  the  Elixia
       Masthugget isochrones. However, the Parties' combined market  share  does  not  exceed  25%  even  under  the  narrowest  possible  market
       definition, which is high-end privately-owned clubs.

   33) Moreover, the merged entity will continue to face similar-sized competitors: high-end players like Nordic Wellness (market share over [30-
       40]% - in number of members), Hagabadet/Feelgood (market share over [5-10]%) and Myrberg Björn (market share over [0-5]%), as well as low-
       cost clubs such as Crudo Träningscenter and Exhale Gym (together market share over [5-10]%).

2 Sundbyberg

   34) Following the opening of the Elixia club in October 2013, there is also an overlap in the city of Sundbyberg.

   35) In the Notifying Parties' view, the border between Sundbyberg and Solna goes through a city cluster, and a geographical market  comprising
       only Sundbyberg would therefore not reflect the competitive situation in the market. Nevertheless, the Notifying Parties  provided  market
       shares based on catchment areas of 15 minutes walking distance around each club.

   36) In the city/borough of Sundbyberg only, the Parties will have the following combined market shares in various possible product markets:

       |                                       |Combined market share                          |Combined market share (number of members)  |
|                                       |(number of clubs)                              |                                           |
|Privately and publicly-owned clubs     |18.2 %                                         |[…]%                                       |
|Privately-owned clubs only             |20 %                                           |[…]%                                       |
|Privately-owned high-end clubs         |20 %                                           |[…]%                                       |

                                                    Source: Notifying Parties' estimate (2012)

   37) The Parties' combined market share will remain limited, post-transaction, as it will be below 25% in all alternative  markets,  except  in
       the market for high-end privately-owned clubs, where it is only slightly higher ([…]% when measured in number of members).

   38) In addition, as pointed out by the Notifying Parties, the border between Sundbyberg and the neighbouring city/borough Solna goes through a
       city cluster. Moreover, the distance between several of the Solna clubs (such as Actic Solna) and  the  SATS  and  Elixia  clubs  is  very
       limited, approximately 1 km. Therefore, post-transaction several other fitness clubs will continue to exert competitive  pressure  on  the
       merged entity.

3 Conclusion

   39) In light of the above, given the limited combined market position of the Parties and the presence of numerous competitors, the  Commission
       concludes that the Transaction is not likely to lead to a significant impediment to effective competition on the market(s)  for  operation
       of fitness clubs in the cities of Gothenburg or Sundbyberg, regardless of the exact product and market definition considered.

       CONCLUSION

   40) 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]         Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission  Consolidated  Jurisdictional  Notice
      (OJ C95, 16.04.2008, p. 1).
[3]   Case COMP/M.3169 Bridgepoint Capital / Permira / Holmes Place ("Bridgepoint"), paragraph 10.

[4]   Bridgepoint, paragraph 14.

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                                                                  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.

                                                                 MERGER PROCEDURE