CELEX: 31993M0319
Language: en
Date: 1993-08-30 00:00:00
Title: COMMISSION DECISION of 30.08.1993 declaring a concentration to be compatible with the common market (Case No IV/M.319 - BHF / CCF / CHARTERHOUSE) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31993M0319

COMMISSION DECISION of 30.08.1993 declaring a concentration to be compatible with the common market (Case No IV/M.319 - BHF / CCF / CHARTERHOUSE) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 247 , 10/09/1993 P. 0000

 COMMISSION DECISION of 30.08.1993 declaring a concentration to  be compatible with the common market (Case No IV/M.319 - BHF /  CCF / CHARTERHOUSE) 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 party Dear Sirs, Subject : <tab> Case No IV/M.319 - BHF/CCF/Charterhouse  <ind>  <ind> Your notification of 27.07.1993 pursuant to  Article 4 of Council Regulation No 4064/89 (Merger Regulation)  1. <ind> On 27th July 1993 Berliner Handels- und Frankfurter  Bank (BHF) and Crédit Commercial de France S.A. ("CCF")  notified an operation whereby they will acquire joint control  of Charterhouse plc ("Charterhouse") a wholly owned subsidiary  of the Royal Bank of Scotland plc ("RBS") by way of purchase of  shares.  2. <ind> After examination of the notification, the Commission  has concluded that the proposed operation falls within the  scope of the 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> BHF is a German bank whose main activities are  commercial banking and financial services. CCF is a French bank  whose main activities are commercial and retail banking.  Charterhouse is a U.K. investment or "merchant" bank.   II. <ind> CONCENTRATION  4. <ind> BHF and CCF will have equal shareholdings in, and an  equal number of directors on the board of, a holding company  ECF Holding, which will in turn wholly own a further holding  company Charterhouse European Holding Ltd, ("CEHL") set up to  acquire 90.1% of the share capital of Charterhouse. The balance  of 9.9% of Charterhouse's share capital will be held by RBS,  which will in effect remain a passive minority shareholder;   moreover the remaining stake of RBS is subject to a put and  call option entered into with CEHL, and exercisable two years  after completion. RBS will retain the Capital Markets Division  and private client and investment management business of  Charterhouse. Consequently, apart from these latter activities  of Charterhouse which are being transferred to RBS, BHF and CCF  will have joint control of Charterhouse within the meaning of  the Merger Regulation.  5. <ind> Charterhouse is an existing undertaking engaged in  investment banking. It currently operates as an autonomous   subsidiary of RBS, with independent offices and facilities and  after the current operation will continue to perform on a  lasting basis all the functions of an autonomous economic  entity.  6. <ind> The activities of Charterhouse are predominantely  carried out in the UK. As an investment bank Charterhouse is  active to a varying extent in most financial services required  by UK corporate customers. The main activities performed  include general corporate advice, mergers and acquisitions  advice, equity capital raising/underwriting, development  capital investment and institutional stockbroking. Although a  certain degree of harmonisation has already been reached and  further improvements can be expected, these activities will  tend for the foreseable future to be national in geographic  scope as they usually require a detailed knowledge of local  corporate law and business structures, accounting conventions,  regulatory regimes and market practices. The necessity to  comply with and work within the framework of these local  constraints (stock exchange rules, for example), the need to  work in close relationship with the customer, as well as the  latter's preference for local banks to supply the required  services make it extremely difficult for a financial  institution to perform the above mentioned services without  being physically established in the national market concerned.  7. <ind> BHF and CCF perform similar investment banking  activities in Germany and France respectively but do not  provide these services in the UK. BHF has a subsidiary based in  London, Frankfurt Consult UK Ltd, but this company employs only  two executives and works only as a marketing outlet for  advising UK companies wishing to make acquisitions in Germany.  Similarly, CCF employs only six people in this area in the UK  to advise UK companies on making acquisitions in France and  Italy. These activities can not be viewed as competing with  those carried out by Charterhouse. Anyway, BHF and CCF have  agreed to close their UK activities in this area following the  acquisition of Charterhouse.  8. <ind> In addition to its primary investment bank activities  listed in paragraph 6, Charterhouse, like BHF and CCF, is also  active in money markets trading, foreign exchange trading and  derivative trading. These activities whose geographical scope  is international are part of the normal business of any bank.  They are predominantly conducted in highly competitive inter- bank markets where there are a large number of players  including most of the internationally active  industrial  companies. Most of these operations are carried out on a day to  day basis or even in real time through sophisticated electronic  data transmission means linking the various operators in these  markets. These activities are generally organised within each  subsidiary of a bank on a profit center basis with a large  autonomy in order to be able to react immediately to changing  conditions of the market caused by any sort of events of a  political, social, economical or even climatic nature. Any  attempt to coordinate the behaviour of the players in these  markets would undermine their speed of reaction and thus their  ability to act efficiently. Therefore, the  conditions of  operation in these markets are such that any possible advantage  of coordination of the competitive behaviour would be largely  offset by its potential inconveniences.  9. <ind> It follows from the above that Charterhouse is not an  actual competitor of its parents, either as regards its core  investment banking business where the undertakings concerned  have activities in different national geographic markets or in  relation to activities which are international in scope such as  money markets operations, foreign exchange and derivatives.   <ind> Furthermore, for the reasons mentioned in paragraphs 6  and 8, the joint venture cannot realistically be viewed as a  potential competitor of its parents.  10. <ind> Therefore, the joint acquisition of Charterhouse by  BHF and CCF is a concentration as the JV is an autonomous  economic entity performing on a lasting basis and there is no  coordination of the competitive behaviour of the undertakings  concerned.  III. <ind> COMMUNITY DIMENSION  11. <ind> The enterprises concerned have a combined aggregate  worldwide turnover, calculated in accordance with Article  5(3)(a) of the Merger Regulation, in excess of 5,000 million  ECU (one-tenth of total assets of CCF 5,138 million ECU, of BHF  2,470 million ECU and of Charterhouse 324 million ECU).  Both  BHF and CCF have a Community-wide turnover in excess of 250  million ECU but do not achieve more than two-thirds of their  aggregate Community-wide turnover in one and the same Member  State.  The operation therefore has a Community dimension.  IV. <ind> COMPATIBILITY WITH THE COMMON MARKET  12. <ind> Charterhouse's main activities are provision of  advice on mergers and acquisitions, financial strategy, capital  raising, and stockbroking in the UK (over the past  five years  [Business secrets - over 60%.] of Charterhouse's profits have  been derived from these activities).  13. <ind> Just as Charterhouse is mainly active in U.K.  corporate finance markets, BHF is mainly active in Germany and  CCF in France. In 1992 [Business secrets - over 60%.] of BHF's  total EC turnover was achieved in Germany and BHF's principal  activity in the UK is corporate lending mainly to the UK  subsidiaries of German companies. In 1992, [Business secrets -  over 60%.] of CCF's total EC turnover was achieved in France,  where it carries out its retail banking operations (180  branches throughout France) and most of its  investment bank  activities, such as mergers and acquisitions advice, and  placement of new equity issues. Accordingly, there is no  significant competitive overlap in these activities.  14. <ind> As already stated, a small proportion of  Charterhouse's activities involves trading operations which are  international in scope.  However, these activities are  predominantly for Charterhouse's own account. Moreover,  although global estimates are difficult to calculate,  Charterhouse, BHF and CCF together account for [Business  secrets - less than 5%.] of the global daily turnover in London  foreign exchange and derivatives trading. Therefore concerns  about horizontal overlap do not arise.  15. <ind> Furthermore, the strengthening of Charterhouse by  virtue of the large financial resources of BHF and CCF gives no  cause for concern, in view of the presence of strong  competitors in the UK corporate finance sector.  V. <ind> ANCILLARY PROVISIONS  16. <ind> The RBS group agrees not to solicit for a period of  [Business secrets - less than 3 years.] from completion any  person employed by Charterhouse in its treasury division at the  date of the agreement. The purchasers and their subsidiaries  also agree not to solicit for the same period any person  employed in Charterhouse's former capital market division at  the date of the agreement. The capital market division is being  retained by RBS. Following the division of the stockbroking  business of Charterhouse, the parties, the RBS group on the one  hand and the Charterhouse group on the other hand, also agree  not to solicit former employees of the institutional and  private client stockbroking businesses respectively for a  period of [Business secrets - less than 3 years.] following  completion of the sale of the private client business to RBS.  These restrictions are necessary in order to allow the above- mentioned businesses to establish themselves on the market  independently.  17. <ind> RBS agrees for the period between the date of the  agreement and completion that the Charterhouse group business  will be carried on in the ordinary course and that it will not  take certain major decisions or make certain changes without  the purchaser's consent. Charterhouse agrees that the  stockbroking business will be carried on in the ordinary course  prior to completion of the sale of the private client  stockbroking business to RBS.  18. <ind> Charterhouse grants a non-exclusive licence of  software, and provides certain services, to a subsidiary of RBS  which currently manages certain pension funds on behalf of  Charterhouse (and which will continue to do so). The agreement  contains certain provisions as to the confidentiality of the  software and data. The agreement is concluded for an initial  period of 6 months and shall continue thereafter unless and  until it is terminated by either party upon six month's notice.  The Commission acknowledges that in order to make possible the  transfer of the assets under reasonable conditions it is often  necessary to maintain at least for a transitory period such  service links between the vendor and the JV. However, in this  case, as the parties have not put forward convincing arguments  justifying the objective need for an agreement of a potentially  indefinite  duration, it is considered that these agreements  are only covered by the present decision for a period of three  years following completion.  19. <ind> Certain permissions and prohibitions concerning the  use of the corporate/business names "Charterhouse" and "Tilney"  have been agreed between RBS and Charterhouse. These clauses  are designed to ensure the full transfer to the purchasers of  the assets (including goodwill) of the businesses being  acquired.  20. <ind> Charterhouse agrees to grant a perpetual royalty-free  non-exclusive licence to RBS of certain existing software and  certain software which is currently being developed to replace  the existing software aimed to assist dealers and to record  dealing transactions. Charterhouse agrees only to use the  existing software for its own purposes. The agreement contains  certain provisions as to the confidentiality of the software  and related data. The existing software is currently being used  by both Charterhouse's treasury division and the capital  markets division, the latter being retained by RBS and  therefore not part of the operation. These provisions are  directly related and necessary to the division of the two  businesses.  21. <ind> Finally, a non-competition covenant is to be entered  into by the notifying parties not to compete with the joint  venture in relation to corporate finance business in the UK as  long as they jointly control Charterhouse. This restriction  expresses the parties' intention to concentrate their future UK  activities in this area in Charterhouse.  22. <ind> These agreements are directly related and necessary  to the implementation of the concentration and are therefore  ancillary within the meaning of the Regulation.  VI. <ind> CONCLUSION  23. <ind> It follows from the above that the proposed  concentration would not create or strenghten a dominant  position as a result of which competition would 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 the Merger Regulation.  For the Commission,