CELEX: 31995M0597
Language: en
Date: 1995-06-28 00:00:00
Title: COMMISSION DECISION of 28/06/1995 declaring a concentration to be compatible with the common market (Case No IV/M.597 - Swiss Bank Corporation / S.G. Warburg) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31995M0597

COMMISSION DECISION of 28/06/1995 declaring a concentration to be compatible with the common market (Case No IV/M.597 - Swiss Bank Corporation / S.G. Warburg) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 180 , 14/07/1995 P. 0004

  COMMISSION DECISION of 28/06/1995 declaring a concentration  to be compatible with the common market (Case No IV/M.597 -  Swiss BankCorporation / S.G. Warburg) 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  To the notifying party  Dear Sirs,  Subject :<ind> Case No IV/M.597  Swiss Bank  Corporation/S.G.Warburg  <ind> <ind> Notification of 22.05.1995 pursuant to Article 4  of Council Regulation No 4064/89  1.<ind> On 22 May 1995 Swiss Bank Corporation (SBC), through  its whollyowned U.K. subsidiary SBCI Swiss Bank Corporation  Investment banking Limited (SBCI), notified a proposed  concentration by which it will acquire, by means of a cash  purchase, all the investment banking activities of the S.G.  Warburg Group plc. Excluded from the operation will be those  activities carried by S.G. Warburg Group plc's 75%  subsidiary, Mercury Asset Management Group plc (MAM), which  are primarily related to asset management.  I.<ind> THE PARTIES  2. <ind> SBC, which is one of the "big three" Swiss credit  institutions, is engaged in retail banking, private banking  and asset management in its home country but also in  wholesale banking, investment banking, securities and  treasury trading, both in Switzerland and abroad.  3. <ind> The S.G. Warburg Group (SGW) is the leading UK  investment bank and its main activities include mergers and  acquisitions (M&A) advice, equity and fixed interest  underwriting, securities distribution and trading,  specialist and project financing and the management of  pension fund and investment trusts.  II.<ind> THE OPERATION  4. <ind> Under a share purchase agreement signed on 10 May  1995, SBCI, the UK investment banking subsidiary of SBC,  will acquire all the issued shares of six whollyowned  subsidiaries of SGW, namely S.G. Warburg & Co. Limited, S.G.  Warburg Securities Limited, S.G . Warburg Overseas Limited,  S.G. Warburg Group Management Limited, S.G. Warburg Holdings  Limited and Rowe & Pitman Money Broking Limited. These  companies comprise all of the trading and operating  companies involved in SGW's investment banking operations.  5.<ind> [Business secrets deleted. By the present operation  SBC is not acquiring S.G. Warburg Group plc, the ultimate  parent company of the Warburg Group and six intermediate  holding companies and finance vehicles belonging to the same  group. These companies are hereunder collectively designated  as the "option companies".], the parties entered into  several other agreements, in particular:  <tab> <ind> a "put and call option agreement", by which MAM  (which in the meantime will become the owner of S.G. Warburg  Group plc and the intermediate holding companies) will sell  and SBC will buy all the shares of the above mentioned  companies (the "option companies");  <tab> <ind> a "funding agreement" by which SBC undertakes  the obligation to fund the indebtedness of the option  companies under the defined external borrowing agreements;  <tab> <ind> an "administration agreement" under which the  option companies will appoint SBCI as their administrator to  perform services and act as their agents in connection with  the defined external borrowing arrangements; and  <tab> <ind> By a series of "transfer agreements" and "deeds  of release", the parties have agreed that a nominee of SBC,  its Dutch subsidiary SBC BV, will become liable to fund the  debt owed to third parties by the option companies and to  fund the amounts owing from the acquired operating companies  of SGW to the option companies.  III.<ind> CONCENTRATION  6.<ind> The acquisition by SBCI of all the investment  banking activities of SGW is a concentration, since SBC  through SBCI will acquire sole control of the acquired parts  of SGW, according to Article 3(1)(b) of the Merger  Regulation.  IV.<ind> COMMUNITY DIMENSION  7.<ind> The combined aggregate worldwide turnover of SBC and  the acquired parts of SGW, calculated in accordance with  Article 5(3)(a)of the Merger Regulation, exceeded 5,000  million ECU in the last financial year (onetenth of total  assets of SBC amounts to 13,089 million ECU, and of acquired  parts of SGW amounts to 2,395 million ECU). Both SBC and the  acquired parts of SGW have a communitywide turnover in  excess of 250 million ECU but do not achieve more than  twothirds of their aggregate communitywide turnover in one  and the same Member State. The operation therefore has a  Community dimension.  V.<ind> COMPATIBILITY  8.<ind> The activities of the undertakings concerned are  mainly complementary. SBC is a universal bank which is  active in retail, private and wholesale banking, as well as  in assets management, M&A advice, equity underwriting, debt  issues, foreign exchange trading, derivatives trading and  securities trading. The acquired parts of SGW have no  significant activities in what regards retail, private and  wholesale banking, assets management and foreign exchange  trading. Therefore the only activities where there is a  significant overlap are those related to investment banking  activities, in particular M&A advice, equity underwriting,  debt underwriting, securities (equity and debt) trading and  derivatives.  9.<ind> M&A advice (also denominated corporate finance  advice) is a services activity which consists in advising  companies or public adminstrations. These services include  advice on acquisitions/disposals by trade purchases/sales,  public bids, privatisation, corporate restructuring,  corporate rescues and advice on demergers. Although many M&A  transactions are crossborder, it is important to distinguish  the activity, which may be international in scope, from the  service provided, which is mainly national in scope. The  national character of M&A advice services results from a  number of factors, such as the need for detailed knowledge  of local corporate law and business structures, accounting  rules, regulatory regimes and market prices. In practice,  the provision of M&A advice services generally requires that  the principal advisor should be physically established in  the country where the target company is situated [See case  no. IV/M.508  BHF/CCF (II).].  10.<ind> SGW is a leading European player in M&A and has  activities in several EU countries such as the UK, Germany,  France, Italy, Spain, the Netherlands and Sweden, as well as  in countries such as the USA, Japan, Hong Kong and  Singapore. SBC carries M&A activities in the EU in two  countries, UK and Italy, and outside Switzerland and the EU  it is also active in particular in Latin America and Eastern  European countries.  11.<ind> Therefore, the main EU countries in which both SGW  and SBC were active in 1994 were the UK and Italy. In the UK  SGW had a [Business secret deleted. Between 5 and 10%.]  market share of all deals concerning a UK target, and SBC  had a market share below one percent. In Italy SBC had a  [Business secret deleted. Between 1 and 5%.] market share  and SGW's market share was below one percent. For the past  three to four years Warburg has been the leading UK and  European investment bank.  12.<ind> The underwriting of equity and of debt issues,  together with M&A advice, constitutes what many consider as  the core activity of investment banking. Equity and debt  underwriting is related to the primary market, which means  the offering of new securities (shares or bonds) to the  public. Underwriting means that the investment bank insures  (underwrites) the risk of adverse market price fluctuations  during the period of distribution by buying the securities,  or otherwise undertaking to buy any unsubscribed shares from  the issuing corporation at the agreeed issue price and then  selling the securities to the public, making its profit on  the spread between its buying and selling price. Although  the geographic scope of these activities may be national or  even narrower in scope as far as SGW and SBC are concerned,  these markets appear to be global since major players are  competing for major issues all over the world.  13.<ind> SGW has a stronger position than SBC in  international equity underwriting. In 1994, SGW ranked  eighth among book runners for all international equity and  equitylinked issues worldwide, with a market share of  [Business secret deleted. Between 4 and 6%.] compared to  about [Business secret deleted. Less than 4%.] for SBC.  Within the EU, for the same year, SGW had a market share of  about [Business secret deleted. Between 5 and 10%.],  compared to less than two percent for SBC for all equity and  equitylinked issues.  14.<ind> With regard to international debt underwriting, SBC  holds astronger position than SGW. SBC was the book runner  in 1994 for 149 debt issues worldwide with a [Business  secret deleted. Between 3 and 6%.] market share, compared to  SGW's 32 debt issues and market share of about [Business  secret deleted. Less than 3%.]. In the EU SBC was the book  runner in 65 debt issues with a [Business secret deleted.  Between 3 and 6%.] market share, and SGW with 23 issues  holds a market share below two percent.  15.<ind> Securities trading includes trading and dealing in  equity securities and debt securities in the secondary  market. These activities mainly concern securities which are  listed in a registered stock exchange, and its geographic  scope is therefore predominantly national as an operator has  to be authorised to act on any national stock exchange.  16.<ind> With regard to trading on listed equity securities  (this activity is also denominated "equities") both SGW and  SBC are active on several stock exchanges within the EU. The  only EC or EEA market on which SGW has an estimated market  share of more than seven percent is the UK, with [Business  secret deleted. Between 7 and 10%.] in 1994. SBC estimates  that its market share in "equities" is less than five  percent in any EC or EEA equity market, and in the UK its  market share is below one percent.  17.<ind> SGW's debt ("fixed income") trading operations are  limited and at the beginning of 1995 it announced its  withdrawal from a number of fixed income markets. SGW's  operations are limited now to the UK and US Government and  Eurosterling bonds, and for any of these segments the  parties estimate that the combined SBC/SGW operations do not  exceed a five percent market share.  18.<ind> A derivative transaction is a bilateral contract or  payments exchange agreement whose value derives, as its name  implies, from the value of an underlying asset or underlying  reference rate or index. Nowadays derivatives transactions  cover a broad range of "underlyings" such as interest rates,  exchange rates, commodities, equities or other indexes.  Derivatives will include, inter alia, interest rate swaps  and options, forward rate agreements and futures, stock and  index options. In addition to privately negotiated  transactions between financial institutions whose scope is  global, derivatives also include standardised contracts  which are actually traded on organised exchanges, such as  LIFFE in the UK, MATIF/MONEP in France or BELFOX in  Belgium.  19.<ind> With regard to organised exchanges within the EU,  in no EU country will the combined market share SGW/SBC  exceed 15%. For instance, in each of the two largest  exchanges within the EU, LIFFE (UK) and MATIF/MONEP  (France), the combined SBC/SGW market share does not exceed  eight percent.  20.<ind> To sum up what is stated in the preceding  paragraphs, it can be said that the relevant markets for  investment banking activities are still very fragmented  within the EU with a number of significant players, both  European and from the US, and, in any one of the relevant  product/services activities and geographic markets which has  been identified above, the combined market share SGW/SBC  will not exceed 15%.  21.<ind> From a global point of view, the concentration will  create a banking group of significant size within Europe, as  according to data obtained from a survey carried out in 1994  by the specialised publication "The Banker", after  acquisition of the investment banking activities of SGW, SBC  will rank sixth among major European banks by core capital  and sixteenth by assets.  VI<ind> ANCILLARY RESTRAINTS  22.<ind> The notifying party has requested that the clauses  and agreements described below be considered as ancillary to  the concentration.  23.<ind> Clause 9 of the Share Purchase Agreement contains a  number of provisions concerning the conduct of business of  the acquired parts of SGW before full implementation of the  deal. These provisions include, inter alia, the following  obligations for the seller:  <tab> <ind> not to do, or omit to do, any act which might  prevent the full implementation of the concentration;  <tab> <ind> not to commit any breach of the terms of the  "Administration Agreement";  <tab> <ind> not to create, allot, issue, acquire, repay or  redeem any share or loan capital;  <tab> <ind> not to acquire or dispose of any asset and not  to make any capital expenditure.  24.<ind> Clause 14 of the Share Purchase Agreement  stipulates that, before and after completion, neither the  seller nor any company of its group shall use or disclose  the confidential information it has acquired.  25.<ind> The two clauses mentioned in paragraphs 23 and 24  are intended to protect the full value of the acquired  assets and therefore, to the extent that they would amount  to a restraint of competition, they may be considered as  ancillary.  26.<ind> It was also requested by the parties that the  "funding agreement", the "administration agreement" and the  "transfer agreements" and "deeds of release", mentioned in  paragraph 5, should also be considered as ancillary. To the  extent that these agreements are not considered as an  essential part of the concentration, any restriction of  competition they may include shall be considered as directly  related and necessary to the implementation of the  concentration.  VII<tab> CONCLUSION  27.<ind> It follows from the above that the proposed  concentration would not create or strengthen 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 and with the functioning  of the EEA Agreement. This decision is adopted in  application of Article 6(1)(b) of Council Regulation No  4064/89.  For the Commission