CELEX: 32015M7572
Language: en
Date: 2015-07-06 00:00:00
Title: Commission Decision of 06/07/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7572 - OG CAPITAL / KEM ONE INNOVATIVE VINYLS) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 6.7.2015
C(2015) 4728 final

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|To the notifying party:                                                |                                                                       |

Dear Sir/Madam,

Subject:    Case M.7572 - OG CAPITAL / KEM ONE INNOVATIVE VINYLS
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1] and Article 57 of the Agreement  on  the  European  Economic
Area[2]

    1) On 3 June 2015, the European Commission received notification of a proposed concentration pursuant to Article 4 and following  a  referral
       pursuant to Article 4(5) of the Merger Regulation by which the undertaking  OpenGate  Capital  Group  Europe  SARL  ("OGCGE",  Luxembourg)
       belonging to the OpenGate Capital Group ("OGC", USA) acquires within the meaning of Article 3(1)(b) of the Merger  Regulation  control  of
       the whole of Kem One Innovative Vinyls SAS (“KOIV", France) by way of  purchase  of  shares  (“the  Transaction”).  OGCGE  is  hereinafter
       referred to as the "Notifying Party" and together with KOIV as "Parties".

       THE PARTIES and THE OPERATION

    2) OGCGE is a Luxemburg based private-equity investment company, ultimately controlled by OGC. OGC is specialised in carve-out  transactions,
       i.e. acquiring divisions or subsidiaries of groups which are not at the core of their business and which are sold in  the  context  of  an
       economic rationalisation process.

    3) Through its subsidiaries Benvic Europe SAS (France), Benvic Europe SPA (Italy) and Benvic Europe IBE S.A (Spain) OGC is active in  the  S-
       PVC compounds market. Through its subsidiaries Profialis SAS (France), Profialis NV (Belgium) and Profialis KFT (Hungary), OGC  is  active
       in the PVC profiles market and in the PVC building systems market.

    4) KOIV is a France-based holding company, focusing on the downstream activities of the  PVC chain  with  the  production  and  marketing  of
       products such as ready-for-use  specialty  vinyl  compounds  (combining  PVC  and  various  types  of  additives:  stabilizers,  pigments,
       plasticizers, modifiers, etc.). KOIV is also active in the extrusion of PVC profiles and the manufacturing of building systems, tubes  and
       fittings in PVC.

    5) The Transaction concerns the acquisition in several  steps  of  sole  control  by  OGCGE  of  KOIV  by  way  of  purchase  of  shares  and
       reorganisation.

    6) A first step is the acquisition of KOIV by K1 Group SAS, which is a holding company, created on December 18, 2013 for the acquisition,  by
       OGC and Mr. Alain de Krassny[3] of Kem One SAS.[4] This is a company active  in  the  production  of  PVC,  a  business  upstream  of  the
       businesses where KOIV is active.

    7) Then, within a period of less than 6 months, pursuant to a reorganization of the shareholdings of K1 Group SAS and KOIV  between  OGC  and
       Mr. de Krassny, OGCGE (and ultimately OGC) would acquire the sole control of KOIV, […]

    8) Consequently, the Transaction constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

       EU DIMENSION

    9) The Transaction does not meet either of the alternative jurisdictional thresholds under Article 1 of the Merger  Regulation,  because  the
       combined aggregate worldwide turnover of all the undertakings concerned in […]* (EUR […] million for OGC, EUR […]  million  for  KOIV)  is
       below the threshold of EUR 2,500 million[5]. Therefore, the proposed concentration does not have an EU dimension  within  the  meaning  of
       Article 1 of the Merger Regulation.

   10) Due to the fact that the case fulfils the criteria for being notified in […]** different Member States ([…]***),  on  13  March  2015  the
       Notifying Party submitted to the Commission by means of a reasoned submission, a referral request pursuant to Article 4(5) of  the  Merger
       Regulation with respect to the proposed concentration.

   11) On 15 April 2015, the Commission sent to the Member States a Note on the proposed submission, asking them to express their opinion on  the
       proposed referral within 15 working days. As none of the Member States expressed their disagreement, the concentration was referred to the
       Commission.

   12) The notified concentration was therefore deemed to have an EU dimension in accordance with Article 4(5) of the Merger Regulation.

       MARKET DEFINITION

   13) The Parties' activities overlap in the following markets: (i) S-PVC compounds, (ii) formulation of one pack additives and (iii)  extrusion
       of profiles and building systems for doors and windows, shutters, fencing and cladding. As regards one-pack additives, the Parties  submit
       that their production is very limited, namely less than [0-5]% of the EEA wide production volume. In view of this  limited  overlap,  this
       market will not be further analysed.

1 Product and geographic market definitions

1 S-PVC compounds

   14) Suspension PVC compounds (“S-PVC compounds”) are intermediate products between commodity suspension PVC ("S-PVC") and S-PVC  end-products.
       They are obtained by blending additives (such as pigments, stabilizers or plasticisers) with S-PVC and are further  processed  to  produce
       PVC end-products.

  a. Product market definition

   15) The Commission has assessed the markets for S-PVC compounds in several previous decisions and  considered  that  S-PVC  compounds  form  a
       separate market, different from S-PVC.[6] In addition, the Commission has considered in a previous decision[7] a possible segmentation  of
       the S-PVC compounds market into dry blend and gelled compounds. The Notifying Party considers that the relevant market is the market for S-
       PVC compounds, without further segmentation. The Notifying Party submits that suppliers can switch from one  type  to  the  other  without
       significant costs. In addition, there is supply side substitutability between gelled and dry blend compounds.

   16) The market investigation did not fully support the arguments of the Notifying Party. While producers[8] mostly have the know how  and  the
       technical capacity to produce both types of S-PVC compounds (with different machines though), they did not appear  ready  to  alter  their
       current production balance between dry blend and gelled compounds in the event of a permanent price increase between 5% - 10% for  one  of
       the two products. Turning to customers[9], they clearly use dry blend and gelled compounds in different applications.

   17) In any event, the exact product market definition of S-PVC compounds can be left open, as the Transaction does not raise serious doubts as
       to its compatibility with the internal market under any plausible product market definition.

b.    Geographic market definition

   18) As regards the geographic market definition, in its past decisions the Commission has considered the market to be wider than national, but
       has so far left open the question of whether the market encompasses North-Western Europe[10] ("NWE"), Western  Europe[11]  ("WE")  or  the
       entire EEA.[12]

   19) The Notifying Party submits that the market for S-PVC compounds is EEA-wide, in view of low transport costs, the fact that these are  non-
       hazardous products and that procurement is global. The Commission in its market investigation also considered the possibility of a  market
       encompassing only the countries of Continental North Western Europe ("Continental NWE").[13]

   20) The market investigation in this case was inconclusive in relation to the exact geographic delineation of the market for S-PVC compounds.

   21) Both competitors'[14] and customers'[15] replies indicate that the entire EEA is the widest possible delineation and  NWE  the  narrowest.
       However, all respondents clearly believe that the shorter the distance between supplier and customer  the  better.  There  are  no  strong
       indications of price differences between countries, or areas of the EEA and the few that appear are attributed rather to  transport  costs
       than to different pricing policies of producers. Finally, the pressure from imports from non-EEA producers is not high.

   22) In the present case, the geographic market for S-PVC compounds can be left open, as the Transaction does not raise serious  doubts  as  to
       its compatibility with the internal market under any plausible geographic market definition.

2 PVC Building systems

    a. Product market definition

   23) Building systems comprise profiles which are specifically designed to be used in the building industry. Building systems can  be  made  of
       different materials like soft-alloy extrusions, steel, wood or PVC. The building system suppliers add value to the basic profiles as their
       final product is considered a "system", which includes, apart from the profiles, other elements such as the design  and  conceptualisation
       of the system, the purpose-specific fabrication of the profiles (surface treatment of the profiles, cutting, drilling,  punching,  bending
       or the installation of a thermal brake), a variety of articles needed to install the products (all accessories and fittings)  and  service
       and logistics. Building systems suppliers do not offer the assembled products, such as windows or door frames, only the components  needed
       to produce those.

   24) According to the Notifying Party, PVC profiles are sold to intermediaries, generally carpenters/Original Equipment Manufacturers  ("OEM"),
       who assemble the profiles to the other components of the final product and then sell them either directly to end-users (i.e.  they  handle
       the installation of the product themselves), or to third party installation specialists. The Notifying Party also submits  that,  contrary
       to the aluminium sector, almost all PVC building systems suppliers have their own range of profile systems. In other words,  the  research
       and development work is vested with building systems suppliers, which is often not the case as regards aluminium extruders.

   25) In a previous case, dealing mainly with aluminium building systems[16], the Commission left open the precise definition  of  the  building
       systems market, while examining whether it would be possible to further sub-divide this market into different segments  depending  on  the
       one hand on (i) the material used (PVC, timber, aluminium) and, on the other hand, on (ii) the final application of the profile, i.e. into
       windows and doors, curtain walls and other products.[17]

(i)   Different materials used

   26) As regards the material used, in view of the previous decisions of the Commission, the Notifying Party considers that profiles in PVC  are
       part of a larger market for profiles manufactured from various materials and that from a demand side, these  materials  are  substitutable
       irrespective of the material used.

   27) Respondents to the market investigation in this case pointed rather to a separate market for PVC building  systems,  indicating  that  the
       production of PVC building systems differs from the production of building systems from other materials due to differences in the machines
       used, legal requirements, accessories and especially prices.[18] The majority of customers also mentioned that in case of a 5-10% increase
       in the price for PVC building systems they would not switch to building systems consisting of other materials.[19]

   28) In addition, the suppliers mentioned that they only produce PVC building systems and that they use other materials like aluminium or  wood
       just as an accessory to their PVC products or as  reinforcement,  but  not  as  main  material.[20]  Moreover,  they  indicated  that  the
       manufacturing process and qualitites of PVC are different than those of aluminium or other materials.[21]

(ii)  Different end applications

   29) As regards the different end applications of the profiles, apart from windows and doors, building systems suppliers  also  sell  shutters,
       fencing and gates, and claddings.

   30) Shutters are of two types: rolling and swinging/louvered. According to the Notifying Party, rolling shutters are complex building  systems
       which comprise not only PVC profiles (cases and lames), but also specific components such as  injected  nozzles,  metallic  components  or
       automatic mechanisms (not manufactured by the Parties). On the contrary, swinging/louvered shutters are  simpler  building  systems  since
       they require fewer components. Unlike rolling shutters,they do not require cases or automatic mechanisms.

   31) Claddings are also of two types, i.e. for roof finishes and for wall coverings.

   32) The Notifying Party submits that the relevant market for building systems on which there is an overlap  between  the  Parties’  activities
       encompasses all different end applications, including windows and doors, shutters, gates and fencing, and cladding mainly because  of  the
       easiness for suppliers to switch from one end application to another, without significant constraints in terms of costs  or  know-how  and
       because suppliers that manufacture profiles for windows and doors usually also manufacture other types of profiles.

   33) All respondents to the market investigation indicated,without providing specific arguments, that the PVC building systems market should be
       further divided by end applications, except for the doors and windows segment. Some  suppliers  indicated  that  they  can  easily  switch
       production from one to another. Others indicated that whilst switching production from windows to doors is easy, the switch from doors  to
       windows is complex.[22] Suppliers mentioned that indeed there are some differences between doors and windows manufacturing as regards  the
       certification process, the complexity of the design and of the fittings/accessories.

   34) In the present case, the Commission considers that the precise product market definition for building systems can be left open, since  the
       Transaction does not raise serious doubts as to its compatibility with  the  internal  market  regardless  of  the  exact  product  market
       definition.

     b.     Geographic market definition

   35) As regards the geographic scope, in its past decisions[23], the Commission considered the market for building systems to  be  national  or
       EEA-wide, leaving the geographic market open. However, in a  more  recent  decision[24]  dealing  with  aluminium  building  systems,  the
       Commission considered the market national or regional for some countries (i.e., the Baltic countries).

   36) The Notifying Party submits that it should be considered as being EEA-wide, given the ever  increasing  trade  flows  between  EEA  Member
       States, but also an increasing part of extra-EEA imports, mainly from Turkey. However, it submits  data,  both  at  the  EEA  and  at  the
       national level.

   37) Respondents to the market investigation in this case have pointed towards a national market, indicating differences in  prices,  customers
       preferences and national habbits, combined with different national regulatory requirements as reasons.[25] Both customers and  competitors
       have mentioned that transport costs can reach up to 15% of the final price of the building systems for distances involving more than  1000
       km.[26]

   38) Customers also mentioned that national/local presence of their suppliers is very important, and in practice they only  buy  from  national
       based suppliers.[27]

   39) In the present case however, the geographic market for building systems can be left open, as the Transaction does not raise serious doubts
       as to its compatibility with the internal market under any plausible geographic market definition.

       COMPETITIVE ASSESSMENT

1 S-PVC compounds

   40) The Notifying Party has submitted market share data[28] for S-PVC compounds overall, gelled and dry blend compounds, for the EEA,  WE  and
       NWE. At the Commission's request they have also submitted data for Continental NWE.

   41) On the basis of this data, the Parties' combined market shares are of less than [20-30]% on the hypothetical EEA-wide market  for  overall
       compounds, dry blend and gelled compounds. Concerning dry blend compounds the Parties' combined market shares remain below  [20-30]%  also
       as regards NWE, WE and Continental NWE.

   42) The only affected markets[29] would be the (i) overall S-PVC compounds and (ii) gelled S-PVC compounds in different alternative geographic
       markets, i.e. NWE, WE and Continental NWE.

     Table 1 – Market shares for S-PVC compounds overall (2013)
                                                      |KOIV |OGC (Benvic) |Combined  |Ineos/
  Doeflex |Begra |Polymer Chemie | |NWE |[5-10]% |[10-20]% |[20-30]% |[20-30]% |[10-20]% |[10-20]% | |WE |[5-10]% |[10-20]% |[20-30]% |[20-30]%
 |[5-10]% |[5-10]% | |Continental NWE |[5-10]% |[10-20]% |[20-30]% |[10-20]% |[10-20]% |[10-20]% | |Source: Form CO

      Table 2 – Market shares for S-PVC gelled compounds (2013)
                                                         |KOIV |Benvic |Combined  |Ineos/
 Doeflex |Begra |Polymer Chemie | |NWE |[5-10]% |[10-20]% |[20-30]% |[10-20]% |[10-20]% |[5-10]% | |WE |[5-10]% |[10-20]% |[20-30]% |[10-20]% |[5-
 10]% |[5-10]% | |Continental NWE |[5-10]% |[15-25]% |[20-30]% |[5-10]% |[15-25]% |[15-25]% | |Source: Form CO
   43) The Notifying Party submits that the Parties’ combined market shares are always  below  [30-40]%,  regardless  of  the  geographic  market
       definition. It also argues that post-transaction, the merged entity will face competition from a number of well-known and well established
       competitors such as Ineos/Doeflex, Begra, Polymer Chemie, and TPV.

   44) The market investigation does not suggest otherwise. For both product markets, S-PVC compounds overall and S-PVC gelled compounds, all  of
       the responding customers indicated that they would be fully able to switch part of their volumes to another supplier in case  of  a  post-
       merger price increase by the merged entity Moreover, all of the responding customers actively pursue a multi-sourcing strategy.[30]

   45) The majority of the responding competitors believe that there is an overcapacity in the market, which has not yet recovered its pre-crisis
       levels.[31]

   46) In view of the Parties’ relatively low combined market shares, the presence of alternative suppliers and the existing overcapacity on  the
       market, the Commission concludes that the Transaction does not raise  serious doubts as regards its compatibility with the internal market
       in relation to the PVC compounds market under any plausible market definition.

2 PVC Building systems

   47) According to the data[32] provided by the Notifying Party, the Parties' activities in the PVC building systems only overlap in  France  in
       the following segments: (i) windows and doors, (ii) gates and fencing, (iii) shutters and (iv) cladding. However,  affected  markets  only
       arise as regards the windows and doors segment.

   48) In France, on the overall segment for windows and doors, the combined market share of the Parties would be around [20-30[%  in  2014.  The
       other suppliers on this market, Rehau, Veka-Gealan and Deceuninck-Inoutic, hold similar market shares between  15%  and  20%.  As  regards
       doors only (5% of the segment) and windows only (95% of the segment), the combined market share of the Parties would be  between  [10-20]%
       and between [15-25]%, respectively, with the abovementioned competitors holding similar market shares.

   49) The Notifying Party submits that the Parties have been facing stronger competition over the past few years from imports from Germany,  the
       Benelux countries and also from Eastern Europe. Furthermore, they indicated that the  market segment of PVC building systems  for  windows
       and doors is characterized by a continuous decrease of demand, both at an EEA level and at a national level. As a consequence, the Parties
       and their competitors have significant spare capacity, which can be quickly and cheaply deployed.

   50) In the Commission's market investigation, the large  majority  of  responding  customers,  have  indicated  that  all  of  above-mentioned
       competitors represent a credible alternative for them in case they would wish to switch  to  alternative  suppliers.  Moreover,  the  data
       gathered through their replies in the questionnaires confirmed the positioning of both Parties as well as  of  their  competitors.[33]  In
       addition, suppliers have indicated that they do not have capacity issues and moreover that,  due  to  the  economic  situation,  there  is
       overcapacity on the market. They have also pointed at threats of imports from  other  countries,  reporting  about  lost  volumes  due  to
       "aggressive imports" from Eastern countries.[34]

   51) Customers indicated that they felt  reassured that as long as there is overcapacity, the prices will not increase, even in case they would
       have to change their suppliers.[35]

   52) In view of the relatively low market shares of the Parties, the presence of alternative suppliers, the overcapacity on the market and  the
       competitive pressure from imports, the  Commission  concludes  that  the  Transaction  does  not  raise  serious  doubts  as  regards  its
       compatibility with the internal market in respect of PVC building systems for windows and doors in France.

       CONCLUSION

   53) 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)
Margrethe VESTAGER
Member of the Commission

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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 1, 3.1.1994, p. 3 ("the EEA Agreement").

[3]   Mr Alain de Krassny, a French citizen, is entrepreneur and private investor  in  the  chemical  industry.  He  is  the  personal  principal
shareholder and chairman of the Supervisory Board of DONAU CHEMIE AG, an Austrian chemical business group.
[4]   Kem One SAS was subject to a recovery proceeding initiated by the Commercial court of Lyon in France on March 27th 2013. Namely, the  Court
has decided to initiate a “procédure de redressement judiciaire” which is a specific method applied by French laws briefly aiming at  saving  the
debtor company and securing its creditors in respect of Kem One SAS. On 20 December 2013 the Court ordered the transfer of 100% of the shares  of
Kem One SAS to the joint venture to be established between OGC and Mr. Alain de Krassny. The acquisition of Kem One  SAS  by  K1  Group  SAS  was
respectively cleared on 17 March 2014 in France (further to a derogation granted on 23 December  2013),  on  9  January  2014  in  Spain,  on  20
December 2013 in Germany and on 20 January 2014 in Austria. The restructuring plan of Kem One SAS entails  financing  in  various  forms  by  the
French State. A State Aid procedure  is  on-going  in  DG  COMP,  Case  State  Aid  –  France  –  38544  Dispositif  exceptionnel  et  temporaire
d'accompagnement des restructurations – Kem One.
*     Should read 2013.

[5]   Turnover calculated in accordance with Article 5 of the Merger Regulation.

**    Should read four.

***   Should read France, Germany, Poland, and Spain.

[6]   See Cases M.4734, INEOS / Kerling, M.6218, INEOS / Tessenderlo Group S-PVC Assets, M.7132 Ineos/Doeflex.

[7]   See Case M.7132, INEOS / Doeflex, paragraphs 10-15.
[8]   Replies to questionnaire to customers "Q2 - Questionnaire to competitors PVC Compounds", questions 4 to 8.

[9]   Replies to questionnaire to customers "Q1 - Questionnaire to customers PVC Compounds", questions 4 to 8.

[10]  Belgium, Denmark, Finland, France, Germany, Ireland, Luxembourg, the Netherlands, Norway, Sweden and the UK.
[11]  NWE, Italy, Portugal and Spain.
[12]  See Case M.7132, INEOS / Doeflex, paragraph 21.
[13]  Belgium, France, Germany, Luxembourg and the Netherlands.

[14]  Replies to questionnaire to customers "Q2 - Questionnaire to competitors PVC Compounds", questions 9 to 12.

[15]  Replies to questionnaire to customers "Q1 - Questionnaire to customers PVC Compounds", questions 9 to 15.

[16]  It should be noted that, in Case COMP/M.6756 - Norsk Hydro/ Orkla/ JV regarding aluminium extrusion, the Commission retained  a  market  of
building systems comprising, but not limited to, the extrusion activity stricto sensu.
[17]  Curtain walls are in general made only of aluminium, due to the technical characteristics that these products must have from  a  resistence
point of view.

[18]  Replies to questionnaire to customers "Q3 - Questionnaire to customers PVC Profiles", questions 11 and 13.

[19]  Replies to questionnaire to customers "Q3 - Questionnaire to customers PVC Profiles", question 19.

[20]  Replies to questionnaire to customers "Q4 - Questionnaire to competitors PVC Profiles", question 21 and 24.

[21]  Replies to questionnaire to customers "Q4 - Questionnaire to competitors PVC Profiles", question 22.

[22]  Replies to questionnaire to customers "Q4 - Questionnaire to competitors PVC Profiles", question 12.

[23]  See Case M.2094 - HT-Troplast/Kömmerling.
[24]  See Case M.6756 - Norsk Hydro/ Orkla/ JV.
[25]  Replies to questionnaire to customers "Q3 - Questionnaire to customers PVC Profiles", question 15 and  to questionnaire to customers "Q4  -
Questionnaire to competitors PVC Profiles", question 27.

[26]  Replies to questionnaire to customers "Q3 - Questionnaire to customers PVC Profiles", question 16.

[27]  Replies to questionnaire to customers "Q3 - Questionnaire to customers PVC Profiles", questions 17 and 18.

[28]  The Notifying Party was able to provide data only for 2013, but submitted that to  its  understanding  market  shares  did  not  materially
change in 2014. Moreover, data was provided in the form of ranges because since there is no publicly available recent information  on  the  S-PVC
compounds market, the Notifying Party provided its best estimates, by compiling its market knowledge.

[29]  For the definition of affected markets, see Annex 1 point 6.3 of Commission Implementing Regulation (EC) No 802/2004, as  last  amended  by
Commission Implementing Regulation (EU) No 1269/2013 (OJ L 336, 14.12.2013, p. 1-36).

[30]  Replies to questionnaire to customers "Q1 - Questionnaire to customers PVC Compounds", questions 17 & 22.

[31]  Replies to questionnaire to customers "Q2 - Questionnaire to competitors PVC Compounds", question 14.

[32]  The Notifying Party was able to provide data only for 2013, but submitted that to  its  understanding  market  shares  did  not  materially
change in 2014. Moreover, data was provided in the form of ranges because since there is no publicly available recent information  on  the  S-PVC
building systems market, the Notifying Party provided its best estimates, by compiling its market knowledge.

[33]  Replies to questionnaire to customers "Q4 - Questionnaire to competitors PVC Profiles", question 5.

[34]  Replies to questionnaire to customers "Q4 - Questionnaire to competitors PVC Profiles", question 40.

[35]  Replies to questionnaire to customers "Q1 - Questionnaire to customers PVC Compounds", questions 27-30.

-----------------------
 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

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