CELEX: 31993M0349
Language: en
Date: 1993-06-29 00:00:00
Title: COMMISSION DECISION of 25.06.1993 declaring a concentration to be compatible with the common market (Case No IV/M.349 - AEGON / SCOTTISH EQUITABLE) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

Avis juridique important

|

31993M0349

COMMISSION DECISION of 25.06.1993 declaring a concentration to be compatible with the common market (Case No IV/M.349 - AEGON / SCOTTISH EQUITABLE) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 181 , 03/07/1993 P. 0000

 COMMISSION DECISION of 25.06.1993 declaring a concentration to  be compatible with the common market (Case No IV/M.349 - AEGON  / SCOTTISH EQUITABLE) 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/M.349 - AEGON/Scottish Equitable  <tab>  <ind> Notification of 19.05.1993 pursuant to Council  Regulation (EEC) No. 4064/89  1. <ind> On 19 May 1993 Aegon International BV ("AEGON") and  Scottish Equitable Life Assurance Society notified an agreement  whereby Scottish Equitable Policyholders Trust Limited  ("Trustco"), a company incorporated to safeguard the rights of  existing policyholders of Scottish Equitable Life Assurance  Society and future participating policyholders, and AEGON  acquire joint control of Scottish Equitable plc, a newly formed  company to which Scottish Equitable Life Assurance Society will  transfer its entire undertaking and business.  2. <ind> After examination of the notification, the Commission  has concluded that the notified operation falls within the  scope of Council Regulation No. 4064/89 and does not raise  serious doubts as to its compatibility with the common market.  I. <ind> THE PARTIES  3. <ind> AEGON, a Dutch company controlled by Vereniging AEGON,  is active in life and non-life insurance, mortgage finance and  property management.  The AEGON group conducts its insurance  operations mainly in the Netherlands and the United States.   <ind> Scottish Equitable Life Assurance Society is a UK mutual  company whose principal activity is the transaction of life  assurance, pension and annuity business, which is carried out  almost entirely in the UK.  A mutual company is, in effect,  owned by its policyholders.   II. <ind> CONCENTRATION  (a) <ind> Joint control  4. <ind> Under the terms of a Joint Venture Agreement dated 20  April 1993 between AEGON and Scottish Equitable Life Assurance  Society, the latter has agreed to transfer all its existing  business, operations and staff to a newly created company,  Scottish Equitable plc.  Following the transaction, Scottish  Equitable Life Assurance Society will be dissolved.  AEGON  itself is not transferring any business to Scottish Equitable  plc.  Scottish Equitable plc will be jointly controlled, via an  interposed holding company ("Holdco"), by AEGON and the newly  created company Trustco.  5. <ind> Trustco will be a company limited by guarantee.   Members of the existing non-executive directors of Scottish  Equitable Life Assurance Society will be the initial members  and directors of Trustco, which will be a non-profit making  body and will not carry on any activity other than to safeguard  the interests of the policyholders of Scottish Equitable Life  Assurance Society and future "participating" or "with-profits"  policyholders.  The sole function of Trustco, which will itself  carry on no business activities, is to retain a degree of  control over the activities of the newly-formed Scottish  Equitable plc, so as to protect the interests of the members of  Scottish Equitable Life Assurance Society, after the latter is  dissolved (in the 'Voting Trust Outline' which is annexed to  the Joint Venture Agreement it is stated that "Trustco will  have no other activity than acting as trustee ...").  6. <ind> AEGON will hold 100% of the ordinary share capital of  Scottish Equitable plc through Holdco.  However, AEGON will  hold only 40% of the voting rights at general meetings of  Holdco and Scottish Equitable plc, and its share in the  "profits" generated by Scottish Equitable plc's "not-with- profits" fund will correspondingly amount to 40% (see below).   Trustco will hold 60% of the voting rights, which will be  reflected in a transfer of 60% of the "profits" generated by  Scottish Equitable plc's "not-with-profits" fund to the "with- profits" fund.  The Joint Venture Agreement provides that the  percentage of voting rights held by AEGON will increase in  accordance with future injections of capital by AEGON (with a  corresponding increase in AEGON's share of the "profits" of the  "not-with-profits" fund).  More specifically it is provided  that AEGON will increase its percentage voting rights to 50.1%  by 31 December 1999 at the latest.  In the intervening period  Trustco will reserve the right to appoint the majority of  directors to the boards of Holdco and Scottish Equitable plc,  until such time as AEGON holds a majority of voting rights,  whereupon AEGON will be entitled to appoint a majority to each  board.  7. <ind> Despite the disparity in ownership and voting rights,  Scottish Equitable plc will be jointly controlled by AEGON and  Trustco.  Certain "Reserved Matters" require a majority of both  the Holdco and Scottish Equitable plc boards, with such  majority including either two directors nominated by each of  AEGON and Trustco or the written approval of both AEGON and  Trustco.  The "Reserved Matters" are set out in the Joint  Venture Agreement and include  the approval or amendment of  strategic and operational business plans, the appointment or  removal of executive directors of Scottish Equitable plc and  the Appointed Actuary, entry into new markets or withdrawal  from existing markets and any material acquisitions or  disposals by Scottish Equitable plc.  8. <ind> The transaction therefore represents the acquisition  of joint control of Holdco and Scottish Equitable plc by AEGON  and Trustco through the blocking position which each of AEGON  and Trustco hold in relation to "Reserved Matters".  (b) <ind> Concentrative joint venture  9. <ind> Scottish Equitable plc, will perform on a lasting  basis all the functions of an autonomous economic entity.   Scottish Equitable plc will be divided, for accounting and  actuarial purposes, into three funds:  a shareholders fund, a  "not-with-profits" fund, and a "with-profits" fund.  10. <ind> The shareholders fund will initially contain the  money subscribed by AEGON for the entire initial issued  ordinary share capital of Scottish Equitable plc, and will be  solely owned by AEGON through its full ownership of Holdco.  It  will effectively constitute the financial vehicle whereby AEGON  will derive economic benefits from the business activities of  Scottish Equitable plc.  11. <ind> The "not-with-profits" fund will contain the "not- with-profits" business transferred from Scottish Equitable Life  Assurance Society.  All new "not-with-profits" business will be  placed in this fund.  As already stated, 40% of the "profits"  or financial surpluses generated by this fund, together with  management fees or commissions, will be allocated to the  shareholders fund, for the sole benefit of AEGON.  12. <ind> The "with-profits" fund will contain the "with- profits" business transferred from Scottish Equitable Life  Assurance Society and, in the case of new "with-profits"  policies, premiums will be paid by new policyholders into the  "with-profits" fund.  Accruing benefits will be paid from this  fund to new and existing policyholders.  Sixty percent of the  "profits or financial surpluses generated by the "not-with- profits" fund will be allocated to the "with-profits" fund to  reflect Trustco's voting interest (see above).  AEGON will not  participate in the "profits" generated by the "with-profits"  fund.  However, management fees and commission income earned  from the transaction of the "with-profits" business will be  transferred to the "not-with-profits" fund.  Since AEGON has a  40% interest in the financial surpluses of the "not-with  profits" fund, AEGON will in turn derive financial benefits  from the transaction of "with-profits" business.  13. <ind> In conclusion, Scottish Equitable plc will  effectively carry on the current and future business activities  of the existing Scottish Equitable Life Assurance Society and  will be a full-function, long-lasting, autonomous economic  entity under the joint control of AEGON and Trustco.  (c) <ind> Absence of coordination  14. <ind> The basic function of Trustco is to protect the   existing policyholders of Scottish Equitable Life Assurance  Society whose policies are to be transferred into the new joint  venture.  It is not reasonable to assume that Trustco will (re- )enter the market having regard to the fact that all its  existing business, operations, staff and assets are to be  placed in the joint venture.  More specifically, under clause  37(B) of the Joint Venture Agreement neither Trustco nor AEGON  (save through its existing UK insurance subsidiary, namely  Aegon Financial Services Group (UK) plc (AFSG)) may directly or  indirectly compete with the business transferred to the JV.   Therefore the operation does not give rise to the coordination  of competitive behaviour between independent undertakings as  regards Trustco and the joint venture, nor as between Trustco  and AEGON.  15. <ind> With respect to possible coordination between the JV  and AEGON's existing UK activities, the following facts must be  taken into account.   <ind> Firstly, AFSG's activities in the life insurance and  pension business market are relatively minor compared to the  size of the transferred business.  The existing premium income  turnover of Scottish Equitable is approximately 20 times larger  than that of AFSG.  Secondly, save for AFSG's existing  business, AEGON is subject to a non-competition agreement as  described above.  Thirdly, AEGON has invested a very  substantial amount of money in the JV and future capital  injections are envisaged with a minimum commitment that AEGON  will increase its percentage voting rights to 50.1% by 31  December 1999, at the latest.  Lastly, although there is no  formal obligation, one has to take into account the nature of  the contractual arrangements with regard to future capital  injections by AEGON, the corresponding increase in AEGON's  voting rights and the abrogation of the joint agreement  required for reserved matters when AEGON's voting rights exceed  80%.  Consequently, in the particular circumstances of this  case there is no coordination of competitive behaviour between  independent undertakings falling within the meaning of Article  3(2) of the Merger Regulation.  16. <ind> Therefore the proposed operation constitutes a  concentration in accordance with Article 3 of the Regulation.  III. <ind> COMMUNITY DIMENSION  17. <ind> The combined aggregate worldwide turnover, calculated  in accordance with Article 5.3(b) of the Merger Regulation, of  AEGON and Scottish Equitable Life Assurance Society exceeded 5  billion ECU in 1992.  Both have a Community-wide turnover of  more than 250 million ECU but do not achieve more than two- thirds of their Community-wide turnover in one and the same  Member State.  Therefore the proposed operation has a Community  dimension in accordance with Article 1(2) of the Merger  Regulation.  IV. <ind> COMPATIBILITY  18. <ind> Over 99% of Scottish Equitable's existing turnover  occurs in the UK, where it is primarily active in the life  insurance, individual and group pension business markets.  19. <ind> The precise relevant product and geographical  reference markets can be left open since, if the narrowest  approach is taken considering each of the above type of  policies as separate relevant product markets and restricting  the geographical reference market to the UK, the increase in UK  market share brought about by the concentration is minimal (or  non-existent as is the case for group pension business) and the  combined market share is below 10% for each.  Moreover, there  are many strong competitors with comparable or higher market  shares.  V. <ind> ANCILLARY RESTRICTIONS  20. <ind> As already mentioned, Clause 37 of the Joint Venture  Agreemeent contains a non-competition clause by which AEGON  (except for ASFG) and Trustco undertake not to compete directly  or indirectly with Scottish Equitable plc.  This clause has to  be considered as a restriction ancillary to the concentration,  since there are reasonable grounds justifying its necessity for  the successful establishment of the JV, and as such is covered  by the present decision.  VI. <ind> CONCLUSION  21. <ind> Therefore, the concentration will not create or  strengthen a dominant position as a result of which effective  competiton will be significantly impeded in the common market  or in a substantial part of it.   <ind> 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