CELEX: 32019M9195
Language: en
Date: 2019-03-29 00:00:00
Title: Commission Decision of 29/03/2019 declaring a concentration to be compatible with the common market (Case No COMP/M.9195 - Great-West Lifeco / Hammerson plc / Swords Pavilions) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 29.03.2019
                                                                C(2019) 2619 final
                                                                              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                                                                 information omitted has been replaced by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.
                                                                To the notifying parties
Subject:            Case M.9195 — Lifeco/Hammerson/Swords Pavilions
                    Commission decision pursuant to Article 6(1)(b) of Council
                    Regulation No 139/20041 and Article 57 of the Agreement on the
                    European Economic Area2
Dear Sir or Madam,
(1)       On 22 February 2019, the European Commission received notification of a
          proposed concentration pursuant to Article 4 of the Merger Regulation by which
          Hammerson (United Kingdom), Irish Life and Clyde Property Fund (both of
          Ireland and both belonging to Great-West Lifeco (“Lifeco”, Canada)), acquire
          within the meaning of article 3(1)(b) and 3(4) of the Merger Regulation joint
          control of Swords Pavilions (Ireland) by way of purchase of shares (the
          “Transaction”).3
(2)       Lifeco, Hammerson and Swords Pavilions are collectively referred to as the
          “Parties”.
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    Publication in the Official Journal of the European Union No C 76, 1.3.2019, p. 15.
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak--- 1.     THE PARTIES
(3)    Irish Life and Clyde Property Fund are subsidiaries of Great-West Lifeco. These
       subsidiaries are active in retail real estate services in Ireland. Great-West Lifeco is
       an international financial services holding company operating in Canada, the
       United States and Europe.
(4)    Hammerson is active in commercial real estate. Its portfolio includes investments
       in prime shopping centres in the United Kingdom, Ireland and France.
(5)    Swords Pavilions is a shopping centre located in Dublin’s northern suburbs, close
       to Dublin airport, with a lettable area of approximately 37 780 sqm. Swords
       Pavilions has over 80 shops, restaurants, cafes, as well as an 11-screen cinema.
2.     THE CONCENTRATION
(6)    Pre-Transaction, Hammerson owns a 50% sole-controlling interest in Swords
       Pavilions, while each of Irish Life and IPUT plc (“IPUT”) hold a 25% non-
       controlling interest in Swords Pavilions.
(7)    Pursuant to the share purchase agreements dated 7 January 2019 entered between
       IPUT and Irish Life and IPUT and Clyde Property Fund, Irish Life will acquire
       5% of IPUT’s 25% interest in Swords Pavilions4 and Clyde Property Fund will
       acquire IPUT’s remaining 20% interest in Swords Pavilions.5 Therefore, post-
       Transaction, Hammerson will continue owning a 50% interest in Swords
       Pavilions, while Lifeco will own a 50% interest (through its subsidiaries Irish Life
       and Clyde Property Fund).
(8)    Following this Transaction, on the basis of the 2006 Co-Ownership Agreement
       and the Deed of Variation, each of Hammerson and Lifeco will have a 50%
       voting interest in votes of the Management Committee. Each of Hammerson and
       Lifeco will have a veto right over strategic commercial decisions relating to
       Swords Pavilions. These strategic commercial decisions relate, inter alia, to the
       appointment, removal and replacement of the Asset Manager, the approval of the
       annual budget, the granting and renewal of leases and any capital expenditure
       relating to Swords Pavilions. In case of disagreement between Hammerson and
       Lifeco on these matters, none of the parties will have a casting vote.
(9)    Lifeco and Hammerson will therefore acquire joint control over Swords
       Pavilions, within the meaning of articles 3(1)(b) and 3(4) of the Merger
       Regulation.
(10)   Swords Pavilions is active in the market for retail real estate rental and derives
       revenue from rents paid by third party tenants. Post-Transaction, Sword Pavilions
       will continue to have a market presence to which a turnover can be attributed. In
       addition, the joint venture will have sufficient financing, staffing and assets
       resources to operate on the market for retail real estate services. In particular,
       Swords Pavilions will continue to have a management team dedicated to its day-
4   Form CO, Annex 6 “Irish Life Agreement” and reply to RFI 1 of 23 February 2019.
5   Form CO, Annex 7 “Clyde Property Fund Agreement” and reply to RFI 1 of 23 February 2019.
                                                    2
 ---pagebreak---         to-day operations and will be free to recruit its own employees. The joint venture
        will continue to deal with its parents at arm’s length and is intended to operate on
        a lasting basis. Swords Pavilions is therefore a full-function joint venture, within
        the meaning of article 3(4) of the Merger Regulation.
(11)    In light of the above, the Transaction constitutes a concentration within the
        meaning of the Merger Regulation.
3.      EU DIMENSION
(12)    The undertakings concerned have a combined aggregate world-wide turnover of
        more than EUR 5 000 million (Great-West Lifeco: EUR […]; Hammerson
        (including Swords Pavilions): EUR […]).6 Each of them has an EU-wide turnover
        in excess of EUR 250 million (Great-West Lifeco: EUR […]; Hammerson: EUR
        […]), but they do not achieve more than two-thirds of their aggregate EU-wide
        turnover within one and the same Member State.
(13)    The notified operation therefore has an EU dimension within the meaning of
        Article 1(2) of the Merger Regulation.
4.      MARKET DEFINITIONS
(14)    The target, Swords Pavilions, is active on the market for the rental of retail real
        estate properties in Ireland. Lifeco and Hammerson are also active on this market.
4.1.    Product market definition
(15)    The Commission has previously considered that the market for the rental of real
        estate properties was distinct from the market for the development of real estate
        properties and the market for the management of real estate properties on behalf
        of third parties.7 In addition, the Commission has considered, but ultimately left
        open, that real estate services could be segmented according to the use made of
        the real estate property (i.e. between residential and commercial real estate
        property).8
(16)    With regard to commercial properties, the Commission has also considered the
        following segmentations, while ultimately leaving the product market definition
        open: (i) office properties, (ii) retail properties and (iii) industrial properties.9
6   Turnover calculated in accordance with Article 5 of the Merger Regulation.
7   See e.g. Cases M.8229 – Hammerson/Irish Life/ILAC Shopping Centre, paragraph 13; M.6020 –
    ACS/Hochtief, paragraphs 12-14; M.6400 – ECE/Metro/MEC JV, paragraph 26; M.2825 – Fortis AG
    SA/Bernheim-Comofi SA, paragraph 7.
8   See e.g. Cases M.8229 – Hammerson/Irish Life/ILAC Shopping Centre, paragraph 14; M.6400 –
    ECE/Metro/MEC JV, paragraph 25; M.2825 – Fortis AG SA/Bernheim-Comofi SA, paragraph 7.
9   See e.g. Cases M.8229 – Hammerson/Irish Life/ILAC Shopping Centre, paragraph 15, M.6400 –
    ECE/Metro/MEC JV, paragraphs 25-26.
                                                        3
 ---pagebreak--- (17)   More specifically, with respect to the market for the rental of retail spaces, the
       Commission has considered, but ultimately left open, a plausible market for (i)
       the rental of retail spaces in real estate properties (including shopping centres and
       retail parks) of at least 8 000 sqm and 10 000 sqm respectively, as well as a
       distinct market for (ii) the rental of retail spaces in shopping centres of at least 8
       000 sqm and 10 000 sqm respectively.10
(18)   The Parties consider that the relevant product market for the assessment of the
       Transaction is the market for the rental of retail real estate property, without any
       further distinction.11 However, in line with the Commission’s decisional practice,
       the Parties have provided data on narrower plausible product markets.
(19)   In the present case, the Commission will assess the effects of the Transaction on
       the market for the rental of retail spaces as well as on the plausible narrower
       markets for the rental of retail spaces in real estate properties (including shopping
       centres and retail parks) of at least 8 000 sqm and 10 000 sqm respectively and
       the rental of retail spaces in shopping centres of at least 8 000 sqm and 10 000
       sqm respectively.12
(20)   Given that the Transaction does not raise serious doubts as to its compatibility
       with the internal market under any plausible market definition, the exact product
       market definition can be left open.
     4.2.    Geographic market definition
(21)   In its prior decisional practice, the Commission has considered that the
       geographic scope for the rental of retail real estate properties (and its plausible
       segmentations) was national or regional, while ultimately leaving the question
       open.13
(22)   The Parties do not object to the Commission’s approach.14
(23)   In the present case, the Commission will assess the effects of the Transaction in
       both its broadest scope (national) and its narrowest plausible scope (regional).
(24)   Given that the Transaction does not raise serious doubts as to its compatibility
       with the internal market under any plausible market definition, the exact
       geographic market definition can be left open.
10 See e.g. Cases M.8229 – Hammerson/Irish Life/ILAC Shopping Centre, paragraph 16; M.6400 –
   ECE/Metro/MEC JV, paragraph 38.
11 Form CO, paragraph 6.38.
12 See e.g. Cases M.8229 – Hammerson/Irish Life/ILAC Shopping Centre, paragraph 16; M.6400 –
   ECE/Metro/MEC JV, paragraph 38.
13 See e.g. Cases M.8229 – Hammerson/Irish Life/ILAC Shopping Centre, paragraph 20; M.6400 –
   ECE/Metro/MEC JV, paragraph 44.
14 Form CO, paragraph 6.41.
                                                  4
 ---pagebreak---      4.3. Conclusion
(25)   For the purpose of this decision, the precise market definition of the rental of
       retail real estate can be left open, as the Transaction does not give rise to serious
       doubts even under the narrowest plausible market definitions.
5.     COMPETITIVE ASSESSMENT
     5.1. Overview of the affected markets
(26)   Pavilions Swords is active in the rental of retail real estate properties in Ireland,
       and more specifically, in the Great Dublin Area (“GDA”). Lifeco is also active in
       the rental of retail real estate properties in Ireland and the GDA.
(27)   Therefore, the Transaction gives rise to horizontal overlaps in the market for the
       rental of retail real estate properties (and its plausible segmentations) at both
       national (i.e. Ireland) and regional (i.e. GDA) levels.
(28)   The table below shows the Parties’ market shares on the overlap markets.
                                  Rental of retail spaces in Ireland
              Lifeco              Hammerson           Swords Pavilions     Combined
              [0-5]%                [5-10]%                [0-5]%          [10-20]%
                                 Rental of retail spaces in the GDA
              Lifeco              Hammerson           Swords Pavilions     Combined
             [5-10]%               [10-20]%                [0-5]%          [10-20]%
                         Rental of retail spaces in properties >8 000 sqm
                                              in Ireland
              Lifeco              Hammerson           Swords Pavilions     Combined
              [0-5]%                 [0-5]%                [0-5]%           [5-10]%
                         Rental of retail spaces in properties >8 000 sqm
                                             in the GDA
              Lifeco              Hammerson           Swords Pavilions     Combined
             [5-10]%               [10-20]%                [0-5]%          [10-20]%
                         Rental of retail spaces in properties >10 000 sqm
                                              in Ireland
              Lifeco              Hammerson           Swords Pavilions     Combined
              [0-5]%                [5-10]%                [0-5]%          [10-20]%
                         Rental of retail spaces in properties >10 000 sqm
                                             in the GDA
              Lifeco              Hammerson           Swords Pavilions     Combined
             [5-10]%               [10-20]%                [0-5]%          [20-30]%
                                                    5
 ---pagebreak---                       Rental of retail spaces in shopping centres >8 000 sqm
                                                 in Ireland
               Lifeco              Hammerson             Swords Pavilions    Combined
               [0-5]%                 [5-10]%                [0-5]%           [10-20]%
                      Rental of retail spaces in shopping centres >8 000 sqm
                                                in the GDA
               Lifeco              Hammerson             Swords Pavilions    Combined
              [5-10]%                [10-20]%                [0-5]%           [20-30]%
                     Rental of retail spaces in shopping centres >10 000 sqm
                                                 in Ireland
               Lifeco              Hammerson             Swords Pavilions    Combined
               [0-5]%                 [5-10]%                [0-5]%           [10-20]%
                     Rental of retail spaces in shopping centres >10 000 sqm
                                                in the GDA
               Lifeco              Hammerson             Swords Pavilions    Combined
              [5-10]%                [10-20]%                [0-5]%           [20-30]%
       Source: Form CO, annex 12 and QP1, annex 1.
(29)   The Transaction gives rise to three horizontally affected markets: (i) rental of
       retail space in retail real estate properties of at least 10 000 sqm in the GDA;
       (ii) rental of retail spaces in shopping centres of at least 8 000 sqm in the GDA;
       (iii) rental of retail spaces in shopping centres of at least 10 000 sqm in the GDA.
(30)   The Transaction does not give rise to any other affected market. In particular, the
       Transaction does not give rise to affected market when the geographic scope of
       the rental of retail real estate properties is defined as national. The Commission’s
       competitive assessment will therefore focus on the three affected markets.
     5.2. Parties’ views
(31)   The Parties consider that the Transaction is unlikely to raise serious doubts as to
       its compatibility with the internal market, under any plausible market definition.15
     5.3. Commission’s assessment
(32)   As a general remark, the Commission notes that the market for the rental of retail
       spaces in Ireland and the GDA (and its plausible segmentation) is dynamic.
(33)   Following a period of contraction because of the financial crisis, the Irish retail
       real estate sector has witnessed significant activity since the beginning of 2014.
       For instance, in the GDA, recent transactions involved the sales of the
15 Form CO, paragraph 6.12.
                                                       6
 ---pagebreak---        Blanchardstown Centre for EUR 950 million and the Square Shopping Centre
       Tallaght for EUR 250 million.16
(34)   In addition, over the last few years, there have been several new entrants (such as
       Varde, Deka, Deutsche Bank and Clarendon Group) in the rental of retail spaces
       in Ireland and in the GDA.17 In contrast, there has been no significant exit over
       the last three years.18
(35)   Besides, switching costs are moderate. As already noted in a prior decision
       relating to the rental of retail spaces in Ireland and the GDA, switching costs, for
       a tenant, are mostly composed of the cost of exiting the existing lease. 19 In the last
       few years, the volume of lettable properties have increased and rents have
       decreased. Therefore, the cost of exiting an existing lease may yield a cost
       benefit.20
            5.3.1.   Rental of retail spaces in real estate properties of at least 10 000 sqm
                     in the GDA
(36)   First, the Commission notes that, in the market for the rental of retail spaces in
       real estate properties of at least 10 000 sqm in the GDA, the Parties’ combined
       market share post-Transaction is moderate ([20-30]%) and the increment brought
       about by the Transaction is low ([5-10]%).
(37)   Second, the market for the rental of retail spaces in real estate properties of at
       least 10 000 sqm in the GDA is fragmented and well-established competitors,
       such as Blackstone and Oaktree Capital, exert a competitive constraint on the
       Parties.21
(38)   Thus, in the event of a price increase post-Transaction, retailers could turn to the
       numerous competing owners of retail real estate properties.
(39)   The Commission therefore considers that the Transaction does not give rise to
       serious doubts as to its compatibility with the internal market with respect to the
       market for the rental of retail spaces in real estate properties of at least 10 000
       sqm in the GDA.
            5.3.2.   Rental of retail spaces in shopping centres of at least 8 000 sqm and
                     10 000 sqm in the GDA respectively
(40)   The Commission notes that its assessment with respect to the market for the rental
       of retail spaces in real estate properties of at least 10 000 sqm is also valid for the
16 Form CO, paragraph 8.13.
17 Form CO, paragraph 7.15.
18 Form CO, paragraph 8.31.
19 See case M.8229 – Hammerson/Irish Life/ILAC Shopping Centre, paragraph 30.
20 Form CO, pararaph 8.16.
21 Form CO, paragraph 7.10 and annex 12.
                                                  7
 ---pagebreak---        markets for the rental of retail spaces in shopping centres of at least (i) 8 000 sqm
       and (ii) 10 000 sqm.
(41)   First, the Commission notes that, in the market for the rental of retail spaces in
       shopping centres of at least 8 000 sqm in the GDA and the market for the rental of
       retail spaces in shopping centres of at least 10 000 sqm in the GDA, the Parties’
       combined market shares post-Transaction are moderate ([20-30]% and [20-30]%
       respectively) and the respective increments brought about by the Transaction are
       low ([5-10]% and [5-10]% respectively).
(42)   Second, the markets for the rental of retail spaces in shopping centres of at least 8
       000 sqm and 10 000 sqm respectively in the GDA are fragmented and well-
       established competitors (such as Blackstone and Hines & BVK) exert a
       competitive constraints on the Parties. 22
(43)   Thus, in the event of a price increase post-Transaction, retailers could turn to the
       numerous competing owners of retail real estate properties.
(44)   The Commission therefore considers that the Transaction does not give rise to
       serious doubts as to its compatibility with the internal market with respect to the
       markets for (i) the rental of retail spaces in shopping centres of at least 8 000 sqm
       in the GDA and (ii) the rental of retail spaces in shopping centres of at least 10
       000 sqm in the GDA.
     5.4. Conclusion
(45)   In light of the above and based on all available evidence, the Commission
       considers that the Transaction does not raise serious doubts as to its compatibility
       with the internal market, with respect to the markets for the rental of retail real
       estate properties, under any plausible product and geographic market definition.
6.     CONCLUSION
(46)   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 and Article 57 of the EEA Agreement.
                                                        For the Commission
                                                        (Signed)
                                                        Margrethe VESTAGER
                                                        Member of the Commission
22 Form CO, paragraph 7.10 and annex 12.
                                                  8