CELEX: 31992M0277
Language: en
Date: 1992-12-09 00:00:00
Title: COMMISSION DECISION of 09.12.1992 declaring a concentration to be compatible with the common market (Case No IV/M.277 - DEL MONTE / ROYAL FOODS / ANGLO AMERICAN) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31992M0277

COMMISSION DECISION of 09.12.1992 declaring a concentration to be compatible with the common market (Case No IV/M.277 - DEL MONTE / ROYAL FOODS / ANGLO AMERICAN) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 331 , 16/12/1992 P. 0000

 COMMISSION DECISION of 09.12.1992 declaring a concentration to  be compatible with the common market (Case No IV/M.277 -  DEL  MONTE / ROYAL FOODS / ANGLO AMERICAN) 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 Registered with advice of delivery To the notifying parties Dear Sirs, Subject: <ind> Case No. IV/M277 - Del Monte / Royal Foods /  Anglo American <ind> <ind> Notification of 9.11.1992 pursuant to Article 4 of  Council Regulation No. 4064/89  1.<ind> On 9th November 1992 Royal Foods Ltd. ("Royfood") and  Anglo American Corporation of South Africa Ltd. ("AAC")  notified jointly an agreement concerning the acquisition of  joint control of Del Monte Foods International Ltd. ("DMFI").  2.<ind> The notified operation consists in the acquisition by a  subsidiary of Royfood of the entire issued share capital of  DMFI. Royfood's ultimate parents are the Imerman family  investment consortium (ISC) and an investment consortium  controlled by AAC, which will provide most of the finance  needed to purchase DMFI in exchange for an equity stake in  Royfood.  3.<ind> After examination of the notification, the Commission  has concluded that the notified operation falls within the  scope of Council Regulation No. 4064/89 (the Regulation) and  does not raise serious doubts as to its compatibility with the  common market.  I.<ind> THE PARTIES  4.<ind> Royfood is a South African company engaged in the  canning and export of deciduous fruits, the export of frozen  vegetables, and the manufacture and marketing of culinary dry  mix  products and other foodstuffs in South Africa (other  companies within Royhold are involved in pharmaceuticals and  speciality chemicals, the sales of which are confined to South  Africa).  5.<ind> AAC is a South African investment holding company with  interests in mining, industry, and property.   6.<ind> DMFI is a U.K.-based company engaged in the production  and marketing of canned fruits, fruit-based beverages, dry food  mixes, and other miscellaneous food products.  II.<ind> CONCENTRATION  <ind> a)<ind> Joint control  7.<ind> After the agreement between ISC and AAC is implemented,  DMFI will be wholly owned by a Royfood's subsidiary (Juliet  Holdings S.A., or another subsidiary to be nominated by  Royfood).  8.<ind> The corporate structure by which ISC and AAC will  acquire joint control of DMFI may be summarized as follows: ISC  and AAC will each own 30% of Royal Group Holdings Limited  (Royhold). A pool of the voting rights attached to those shares  ensure that AAC and ISC will jointly exercise their respective  voting rights. In the event of disagreement between them, both  ISC and AAC must reject the proposal in question.  9.<ind> Royhold in turn will hold 51% of Royco, while ISC will  separately hold a 0.3% interest which must be exercised in the  same way as Royhold exercises its votes in Royco. ISC and AAC,  therefore, will control an absolute majority of the shares in  Royco.  10.<ind> Royco will hold 44% of Royfood, with AAC having a  direct holding of between 6% and 11% which must be exercised in  the same way as Royco exercises its votes in Royfood. The  balance of the shares in Royfood will be widely held amongst  some 800 shareholders. Accordingly, Royco will control Royfood,  and Royfood will acquire 100% of DMFI.  11.<ind> Non-voting pool shares held by ISC and AAC in Royhold  or any other Royal Group company which are not within the  voting pool and thus not subject to the voting pool  arrangements referred to above must be used to vote in favour  of any resolution supported by ISC and AAC through the voting  pool, thus ensuring continued joint control.  12.<ind> To reinforce the joint control established at the  shareholders' level, ISC and AAC are each entitled to appoint  equal numbers of directors of Royhold, Royco and of each of the  Royal Group's operating subsidiaries and associates to  represent ISC and AAC respectively. In the event of third party  directors being appointed, such appointment will require the  approval of the relevant board but the total number of third  party directors must be less than the aggregate number of AAC  and ISC directors. The Royhold board will consider and approve  the strategic plan and the annual budget as formulated by the  management of Royhold.  <ind> b)<ind> Concentrative joint venture  13.<ind> DMFI, a previously independent company, will continue  to perform on a lasting basis all the functions of an  autonomous economic entity.  14.<tab> (i)<ind> ISC will continue to play a leading role in  the management of the Royal Group of companies, now including  DMFI, and will have the main responsibility for its market  behaviour  and day-to-day management. SAPCO, a subsidiary of  Royfood, cans and exports to DMFI some [A major part. ] of its  production of deciduous fruits, representing about [Less than  half] of DMFI's requirements, under a long-term supply  agreement (SAPCO was purchased by Royfood from DMFI in 1991,  and hence the proposed concentration will result in the SAPCO  and DMFI businesses coming together again into one group).  15.<ind> (ii)<ind> AAC, essentially an investment holding  company, is introducing substantial new shareholder funds into  the Royal Group in order to finance the acquisition of DMFI.  AAC is basically a financial investor in the newly constituted  group.  16.<ind> AAC has certain financial interests in canned  decidious fruit (DMFI's main activity) and fruit concentrates  (a neighbouring market of fruit juices). AAC has a financial  interest in the production in South Africa of canned deciduous  fruit and fruit concentrate, through a 50% interest in Amfarms  [Deleted for publication. AAC has a further indirect investment  in Amfarms], whose subsidiary RFF is active in these sectors.  Some of these products are exported by RFF to EC Member States.  In addition these activities are so marginal with reference to  both EC markets and AAC overall activities that it does not  seem reasonable that they could be regarded as having potential  for coordination with the activities of DMFI in the EC.  17.<ind> As far as canned deciduous fruits are concerned, RFF  exports constitute less than [A small percentage] of the total  EC market. Even in smaller segments, RFF exports amount at most  to only about [Less than 5%] (eg [Deleted for publication]. As  far as fruit concentrates (an upstream input for fruit juices)  are concerned, RFF has not exported any of its production of  orange concentrate to the EC since 1990, when its estimated  share of total EC imports was [A small percentage], and its  exports of apple concentrate to the EC represented [Less than  5%] of total imports in 1992.  18.<ind> Not only are RFF's exports of canned deciduous fruit,  concentrates and other foodstuffs to the EC marginal with  respect to EC markets, but also RFF's activities constitute a  minute part of AAC's overall business activities. RFF's total  1991 turnover amounted to only [A small amount], or about [A  small percentage] of AAC's total turnover. Little more than  half of RFF's sales are exported, and the export sales value of  AAC's interest in RFF via its stake in Amfarms may be estimated  at about [A small percentage] of AAC's total turnover.  19.<ind> (iii)<ind> As far as dry food mixes are concerned,  none of those produced by companies in which AAC has an  interest, nor those produced by Royfood, are sold in the EC due  to regulatory and tariff barriers.  20.<ind> Both Royfood (through its "Donald Cook" subsidiary)  and AAC, through Amfarms, export frozen broccoli to the E.C.  Royfoods total exports of this product ([A small amount] metric  tonnes annually) are sold to [Two Member States], and represent  [A small percentage] and [A small percentage] respectively of  those countries' imports of frozen vegetables. Amfarms' annual  exports of frozen broccoli amount to less than [A small amount  ] ([A small amount ] metric tonnes in 1991).  21.<ind> In view of the considerations presented above, the  proposed transaction does not have as its object or effect the  coordination of the competitive behaviour of undertakings which  remain independent.  III.<ind> COMMUNITY DIMENSION  22.<ind> The enterprises concerned have a combined aggregate  worldwide turnover in excess of 5.000 million ECU. Both AAC and  DMFI have Community-wide turnover in excess of 250 million ECU,  but do not achieve more than two-thirds of this turnover in one  and the same Member State. Thus the operation has a Community  dimension.  IV.<ind> COMPATIBILITY WITH THE COMMON MARKET  <ind> Relevant product markets  23.<ind> (i)<tab> Canned deciduous fruit  <ind> <ind> The main fruits which make up the canned deciduous  fruit sector in the EC are apricots, peaches, pears, mandarins,  and fruit cocktail. It is not easy to determine the actual or  potential degree of substitutability in this sector, either  between different canned fruits or between canned and fresh or  frozen products (storage and convenience as well as taste will  be relevant).  24.<ind> There is some demand-side evidence in the form of  consumer preferences that would suggest that each canned fruit  constitutes a separate market; an examination of "per capita"  consumption within a single Member State reveals substantial  differences between quantities of different fruits consumed  (thus the "most popular/least popular" ratio is 3:1 in the  U.K., 11:1 in the Netherlands). However, the exact product  market definition may be left open, since even on the narrowest  possible definition, no dominant position is created or  reinforced (see below).   <ind> (ii)<tab> Fruit-based beverages  25.<ind> Pure fruit juices are the second main activity of  DMFI. They are made from fruit concentrates, whereas so-called  "nectars", or mixtures of juice, water and sugar, are made from  fruit pulp. These differences and different consumption  patterns (eg in the U.K. the consumption of pure juice is  approximately five times bigger that of nectars), indicate a  separate product markets for fruit juices and nectars. In any  case since there exists no horizontal overlap between the  parties, there exists no affected market.  <ind> Relevant geographic markets  26.<ind> (i)<ind> Canned deciduous fruit  <ind> <ind> The EC would seem to be a distinct market in view  of an external tariff of 20-24%, EC-wide regulatory controls on  labelling and quality, and substantial FEOGA measures (which in  1991 constituted 15% of DMFI's operating profit). There are  indications that there may be separate national markets within  the EC, in view of different prices (eg substantially higher  prices in Italy) and consumer preferences (in the U.K., Belgium  and Netherlands annual per capita consumption of canned fruits  is over 2 kgs, in Germany, France and Denmark about 1 kg, but  much lower in other Member States). The exact geographic market  definition may be left open, since even on the narrowest  possible definition no dominant position is created or  reinforced (see below).  27.<ind> (ii)<ind> Fruit-based beverages  <ind> <ind> Fruit-based beverages seem to constitute national  markets, in view of high bulk/high transport costs, and of  different demand patterns between Member States (the  juice/nectar consumption ratio is 5:1~in the U.K., 1:2 in  Italy). The exact geographic market definition may be left  open, since there is no horizontal overlap and the vertical  links are marginal (see paragraph 17).  <tab> Assessment  28.<ind> As far as canned deciduous fruit is concerned,  Royfood's only involvement in EC markets is via SAPCO's long- term supply agreement with DMFI (see above, section III(b)).  This existing supply relationship will be integrated into the  new group. DMFI purchases about half of its canned fruit  requirements from other suppliers. DMFI's competitors in the  canned fruit sector in the EC obtain supplies from a large  number of different companies, and so the consolidation of the  vertical link between SAPCO and DMFI does not give rise to  concern about foreclosure effects.  29.<ind> Taking into account the considerations put forward in  paragraphs 15 to 18, any horizontal overlap between AAC and  DMFI may be disregarded.  30.<ind> The significant financial resources of AAC may be used  to invest in DMFI's production and marketing operations.  Nevertheless, taking into account that DMFI faces significant  competition in each Member State from a number of different  companies, this competitive situation should limit the possible  conglomerate  effects of the combination of AAC's financial  resources with the activities of the Royal Group and DMFI in  the Common Market.  31.<ind> Therefore, the concentration will not create or  strengthen a dominant position as a result of which effective  competition will be significantly impeded in the common market  or in a substantial part of it.  For the above reasons the Commission has decided not to oppose  the notified concentration and to declare it compatible with  the common market.  This decision is adopted in application of  Article 6(1)(b) of Council Regulation No. 4064/89.  For the Commission,