CELEX: 32014M7207
Language: en
Date: 2014-06-06 00:00:00
Title: Commission Decision of 06/06/2014 declaring a concentration to be compatible with the common market (Case No COMP/M.7207 - CLAYTON DUBILIER & RICE / ASHLAND WATER TECHNOLOGIES) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

                                        Brussels, 6.6.2014
                                        C(2014) 3876 final

                                        [pic]

                                        |To the notifying party:                                                |                                                                       |

Dear Sir/Madam,

Subject:    Case M.7207 - CLAYTON DUBILIER & RICE / ASHLAND WATER TECHNOLOGIES
         Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1]

    1) On 2 May 2014 the European Commission received notification of a proposed concentration pursuant to Article 4 of the Merger Regulation  by
       which Clayton, Dubilier & Rice Fund IX, L.P. ('CD&R Fund IX', US) acquires within the meaning of Article 3(1)(b) of the Merger  Regulation
       sole control over entities and assets that comprise Ashland Water Technologies ('AWT', US) […].  CD&R  Fund  IX  is  referred  to  as  the
       "Notifying Party". CD&R Fund IX and AWT are collectively referred to as "the Parties".

       THE PARTIES

    2) CD&R Fund IX is a private equity fund formed to make investments in companies active in a variety of economic sectors.  It  is  ultimately
       and solely controlled by Clayton, Dubilier & Rice Group (“CD&R”), a private equity investment group based in the  U.S.  which  originates,
       structures and frequently acts as lead equity investor in management buyouts, strategic minority equity investments  and  other  strategic
       investments.

    3) AWT is currently one of four commercial units of Ashland Inc., US. It is based in the US and has operations worldwide. AWT is  a  supplier
       of specialty chemicals and provides services to the  pulp,  paper,  mining,  food  and  beverage,  power  generation,  refining,  chemical
       processing, general manufacturing and municipal industries. Within its two lines of business (that is,  Pulp  and  Paper,  and  Industrial
       Water), AWT also supplies performance-based feed and control systems, proprietary monitoring devices and remote  system  surveillance.  In
       addition, AWT offers consulting services in relation to utility products, chemicals and plant assets, as  well  as  advice  on  minimising
       energy, water and other operational costs.

       THE OPERATION AND THE CONCENTRATION

    4) The transaction consists in the acquisition of indirect sole control over AWT […], by CD&R Fund IX, through  […],  an  entity  established
       especially for the purposes of this transaction. Therefore the transaction constitutes a  concentration  within  the  meaning  of  Article
       3(1)(b) of the Merger Regulation.

       EU DIMENSION

    5) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million[2] [CD&R : EUR […]  million;  AWT:
       EUR […] million].  Each of them has an EU-wide turnover in excess of EUR 250 million [CD&R: EUR […] million; AWT:  EUR  […]  million]  and
       they do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State. The notified  operation
       therefore has an EU dimension.

       COMPETITIVE ASSESSMENT

    6) The notified transaction does not result in any horizontal overlaps. However, it gives rise to vertical overlaps, between  the  activities
       of AWT and two of CD&R's portfolio companies, respectively Univar (US) and SPIE (France)[3], i.e. between the  distribution  of  chemicals
       (upstream markets) and the supply of process chemicals (downstream markets) and between the supply of water treatment  products  (upstream
       market) and facility management (downstream market).

1     Market definition

1     Supply of chemicals to the paper industry

    7) In previous decisions[4] the Commission has distinguished between the supply of chemicals (i) to the paper industry  and  (ii)  for  water
       treatment in general.

    8) The same decisions concluded that the chemical products used in the paper manufacturing process  can  be  subdivided  into  (i)  commodity
       chemicals, (ii) process chemicals and (iii) functional chemicals. AWT is active only in process chemicals and functional chemicals.

9) As regards process chemicals (that is, chemicals used to improve the efficiency of the production process), AWT  produces  […]  defoamers  and
   contaminant control agents. As regards functional chemicals, AWT is active […] in the supply of surface sizing agents.

       4.1.1.1. Process chemicals (defoamers and contaminant control agents)

   10) The Commission has previously analysed the market of supply of defoamers and the  market  of  supply  of  contaminant  control  agents  as
       separate markets.[5] The Notifying Party agrees with this definition.

   11) In the same decision[6] the Commission has considered the geographic market for both the supply of defoamers and  of  contaminant  control
       agents as EEA-wide.

   12) In the present case both the product and geographic market definition for the supply of defoamers and the supply  of  contaminant  control
       agents can be left open since the notified transaction would not give rise to serious doubts as to its  compatibility  with  the  internal
       market under any plausible market definition.

       4.1.1.2. Functional chemicals (sizing agents)

   13) The Commission in its previous decisions[7] has indicated that sizing agents could be further segmented into internal and  surface  agents
       and that within the segment of internal agents, a delineation could be made between AKD, ASA and rosin  sizes,  but  ultimately  left  the
       market definition open. The Notifying Party submits that internal and surface agents are substitutable across a wide range of applications
       and so are viewed as being part of the same market.

   14) In the same decisions,[8] the Commission considered that the relevant geographic market is no wider than, and most likely, EEA-wide.

   15) In the present case both the product and geographic market definition for the supply of sizing agents can be left open since the  notified
       transaction would not give rise to serious doubts as to its compatibility with the internal market under any plausible market definition.

2 Supply of chemicals for water treatment

   16) As far as water treatment in general is concerned, in the past the Commission distinguished between  (i)  chemicals  for  municipal  water
       treatment and (ii) chemicals for industrial water treatment.[9]

       4.1.2.1. Chemicals for municipal water treatment

   17) Apart from the fact that the Commission has previously considered chemicals for municipal water treatment to be different  from  chemicals
       for industrial water treatment, the Commission has not previously analysed this market.  The  Notifying  Party  suggests  that  the  major
       difference between the two types of water treatment chemicals is that municipal applications require little or  no  servicing  work  apart
       from the chemical treatment of the water, whereas industrial applications require the intervention of specialised technical personnel.  In
       addition, the Notifying Party submits that chemicals for municipal water treatment could be further segmented into chemicals for municipal
       wastewater treatment and chemicals for potable water treatment. However, in  this  case,  the  product  market  definition  pertaining  to
       chemicals for municipal water treatment can be left open as the  transaction does not give rise to serious doubts as to its  compatibility
       with the internal market under any possible plausible market definition as AWT  is  active  […]  in  chemicals  for  municipal  wastewater
       treatment.

   18) As regards the relevant geographic market, the Notifying Party submits that both the market for the supply  of  chemicals  for  industrial
       water treatment and the market for the supply of chemicals for municipal water treatment is EEA-wide in scope.

   19) In the present case both the product and geographic market definition for the supply of chemicals for municipal  water  treatment  can  be
       left open since the notified transaction would not give rise to serious doubts as to the compatibility with the internal market under  any
       plausible market definition.

       4.1.2.2. Chemicals for industrial water treatment

   20) While within the market for the supply of chemicals for industrial water treatment the Commission has concluded that there is no  need  to
       differentiate between industries, in several cases the Commission distinguished between the following categories  of  different  chemicals
       used in industrial water treatment: (i) chemicals for influent and effluent water treatment and  (ii)  chemicals  for  water  cooling  and
       boiling applications.[10]

       A. Influent and effluent water treatment

   21) In a previous decision[11], the Commission noted that the market for influent  and  effluent  water  treatment  chemicals  comprises  both
       coagulants and flocculants. It further considered distinguishing between the physical forms in which influent and effluent water treatment
       chemicals are sold (dry powders, dry beads, liquid dispersion and emulsions) and the organic or inorganic  character  of  such  chemicals.
       However, the precise market definition was left open.

   22) In the same decision,[12] the Commission considered that the geographic scope of the market for  water  chemicals  for  the  treatment  of
       influent and effluent water could be considered EEA-wide in scope, although it ultimately left the question open.

   23) In the present case, both the product and geographic market definition can be left open since the notified  transaction  would   not  give
       rise to serious doubts as to its compatibility with the internal market under any plausible market definition.

      B. Chemicals for water cooling and boiling applications

   24) In a recent decision,[13] the Commission considered that water treatment chemicals for cooling and  boiler  applications  can  further  be
       segmented according to the industry of application (e.g. food and beverages, paper or energy) and to the  specific  chemicals  used  (e.g.
       corrosion chemicals, scale inhibitors, dispersant agents or biocides).

   25) In the same decision, the Commission considered that the geographic market is EEA-wide.[14]

   26) In the present case, both the product and geographic market definition can be left open since the notified transaction would not give rise
       to serious doubts as to its compatibility with the internal market under any plausible market definition.

3 Chemicals distribution

   27) In previous decisions[15] the Commission has distinguished three relevant product markets in the chemicals distribution  sector:  (i)  the
       market for bulk chemicals (“trading”), (ii) the market for the distribution of commodity chemicals (“commodities”) and  (iii)  the  market
       for the distribution of specialty chemicals (“specialties”).

   28) In previous cases,[16]  the geographic markets for all three segments were considered to be at least national in scope. Some markets, such
       as the United Kingdom and Ireland or Nordic countries, are considered to be at least regional in scope due to the fact  that  a  group  of
       countries is served from the same warehouse.[17] The Notifying Party agrees with this definition.

   29) However, in the present case, both the product and geographic market definition can also be left open since the notified transaction would
       not give rise to serious doubts as to its compatibility with the internal market under any plausible market definition.

4.1.4.      Facility management

   30) Facility management services comprise a broad variety of auxiliary  support  services  to  companies.  In  previous  decisions,  [18]  the
       Commission has considered it possible to distinguish between: (a) technical facility management; (b) commercial facility  management;  and
       (c) general facility management.

   31) The geographic market for all three types of facility management was considered EEA-wide.

   32) In the present case, both the product and geographic market definition can also be left open since the transaction would not give rise  to
       serious doubts as to its compatibility with the internal market under any plausible market definition.

2 Competitive assessment

   33) The Notifying Party submits that there are no horizontal overlaps, and the only vertical relationships arising, between  AWT,  Univar  and
       SPIE, that is between (i) the distribution of chemicals (upstream markets) and the supply of process chemicals  (downstream  markets)  and
       (ii) the supply of water treatment products (upstream market) and facility management  (downstream  market)  do  not  involve  significant
       market shares on either the upstream or downstream markets,.

   34) Concerning the vertical relationship arising between the distribution of chemicals (upstream markets) and the supply of process  chemicals
       (downstream markets), according to data submitted by the Notifying Party, the Parties' combined market shares are less than [20-30]%, with
       the exception of AWT's market shares on the market of supply of contaminant control chemicals to the paper industry, where  it  reaches  a
       market share of [30-40]% in the EEA. This is the only affected market resulting from the proposed transaction.

   35) The Notifying Party argues that there is no risk of input foreclosure, because firstly Univar is  not  a  major  player  in  the  upstream
       markets, either on the commodities distribution market or on the speciality distribution market,  its  market  shares  being  consistently
       below [10-20]%, except for the four Nordic countries (Denmark, Finland, Norway and Sweden) where they reach  [20-30]%  [….].  Second,  AWT
       purchases around [90-100]% of its needs directly from the  chemical  companies  themselves  and  only  [0-5]%  from  distributors.  Third,
       potentially foreclosed competitors of AWT could either look for another supplier, or  also  buy  directly  from  the  chemical  companies.
       Finally, the Notifying Party underlines that while AWT will be under sole control of CD&R, Univar is jointly controlled by CD&R  and  […].
       […] to lose some degree of sales (and profits) for Univar in order to achieve a competitive advantage for AWT.

   36) Along the same lines, the Notifying Party argues that there is no risk of customer  foreclosure,  given  that  AWT  is  not  an  important
       customer for chemicals sold by distributors, given that under all scenarios, the volumes it sources through this  channel  represent  well
       below [0-5]% of the sales by chemical distributors in the EU.

   37) Indeed, considering the relatively low market shares of Univar in the upstream market, the presence of other important  competitors,  like
       Kemira ([20-30]% market share), Nalco ([10-20]% market share), BASF ([5-10]%  market  share)  and  also  the  small  percentage  that  AWT
       purchases from distributors for its needs, the proposed transaction is unlikely to raise any competition concerns.

   38) As regards the vertical relationship arising between the supply of water treatment products  (upstream  market)  and  facility  management
       (downstream market), the Notifying Parties submit that there are no affected markets. The market shares of both  AWT  and  SPIE  in  their
       respective markets are significantly lower than 30% and SPIE only purchases minor amounts of water treatment chemicals  for  its  facility
       management business. Hence the resulting vertical relationship is minor and unlikely to raise any competition concerns.

CONCLUSION

   39) 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
                                        Joaquín ALMUNIA
                                        Vice-President

-----------------------
[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]   Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the  Commission  Consolidated  Jurisdictional  Notice  (OJ
      C95, 16.04.2008, p1).
[3]   None of the other CD&R controlled companies are active in the EU on a market which is vertically related to the markets  on  which  AWT  is
      active.

[4]   Case M.5327 of October 6, 2008, Ashland/Hercules, para. 13. See also Case M.3424 of 26 May  2004,  Ciba  Raisio  Chemical,  para.  8;  Case
      M.1304 of October 5, 1998, Hercules/Betz Dearborn, para. 6.
[5]   Case M.5327 of October 6, 2008, Ashland/Hercules, para. 13.
[6]   Case M.5327 of October 6, 2008, Ashland/Hercules, para. 41-46.
[7]   Case M.1304 of October 5 1998, Hercules/BetzDearborm, Case No COMP/M.3424 of May 26 2004, CIBA /  RAISIO  CHEMICALS,  Case  COMP/M.5355  of
      March 12 2009, BASF/CIBA.
[8]   Case M.1304 of 5 October 1998, Hercules/BetzDearborm, Case No COMP/M.3424 of 26 May 2004, CIBA / RAISIO CHEMICALS, Case COMP/M.5355  of  12
      March 2009, BASF/CIBA.

[9]   Case Comp/M.1631 of 20 October 1999, Suez-Lyonnaise / Nalco, Case M.5327Ashland/Hercules, of October 6, 2008, Ashland/Hercules,  para.  33-
      40.
[10]  Case M.5327 of October 6, 2008, Ashland/Hercules, para. 33-40; Case M.6388 of November 8, 2011, Ecolab/Nalco, para. 8-21.
[11]  Case M.5327 of October 6, 2008, Ashland/Hercules, para 36.
[12]  Case M.5327 of October 6, 2008, Ashland/Hercules, paras 41-46.

[13]  Case COMP/M.6388 of November 8 2011, Ecolab/Nalco, paras 8-13.
[14]  Case COMP/M.6388 of November 8, 2011, Ecolab/Nalco, paras 14-17.

[15]  Case COMP/M.6012 of November 25, 2010, CD&R/CVC/Univar, para. 14; Case COMP/M.5814 of July 16 2010, CVC/Univar Europe/Eurochem, para. 14.
[16]  Case COMP/M.6012 of November 25, 2010, CD&R/CVC/Univar, para. 26; Case COMP/M.5814 of July 16 2010 CVC/Univar Europe/Eurochem, para. 26.
[17]  Case COMP/M.6012 of November 25, 2010 CD&R/CVC/Univar, para. 26; Case COMP/M.5814 of July 16 2010 CVC/Univar Europe/Eurochem, para. 26.
[18]  Case COMP/M.3653of July 13, 2005, Siemens /VA Tech; COMP/M.6020 of January 14, 2011, ACS/HOCHTIEF.

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 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

                                                                 MERGER PROCEDURE