CELEX: 32015M7784
Language: en
Date: 2015-12-04 00:00:00
Title: Commission Decision of 04/12/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7784 - CF INDUSTRIES HOLDINGS / OCI BUSINESS) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 04.12.2015
C(2015) 8895 final

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To the notifying party:

Dear Sir/Madam,

Subject:    Case M.7784 – CF INDUSTRIES HOLDINGS  /  OCI  BUSINESS  Commission  decision  pursuant  to  Article  6(1)(b)  of  Council  Regulation
No 139/2004[1] and Article 57 of the Agreement on the European Economic Area[2]

1) On 30 October 2015, the European Commission received notification of a proposed concentration pursuant to Article 4 of the  Merger  Regulation
   by which the undertaking CF Industries Holdings, Inc. (“CF”, the United States) acquires within the meaning of Article 3(1)(b) of  the  Merger
   Regulation sole control over OCI Business. (The Netherlands), by way of purchase of shares ("the Transaction"). CF is hereinafter referred  to
   as  "the Notifying Party" and CF and OCI Business are collectively designated  as "the Parties”.[3]

       THE PARTIES

    2) CF is active in the manufacturing and distribution of nitrogen  fertilizers  and  other  nitrogen-based  products.  It  operates  nitrogen
       manufacturing complexes in the United States,  Canada  and  the  United  Kingdom,  and  distributes  plant  nutrients  through  terminals,
       warehouses, and associated transportation equipment located primarily in the United States.

    3) OCI N.V is active in the manufacturing and distribution of nitrogen fertilizers, melanine , methanol and other natural gas-based  chemical
       products.

    4) OCI Business consists of OCI's activities in the manufacturing and supply of nitrogen fertilizers, melamine and methanol and  trading  and
       distribution of nitrogen fertilizers. It has manufacturing facilities in the United States and the Netherlands, and a global  distribution
       network.

       THE OPERATION AND THE CONCENTRATION

    5) Pursuant to a Combination Agreement dated 6 August 2015, by and among CF, Holdco (a new holding company based in the United  Kingdom,  and
       constituted for the sole purpose of engaging in the operation contemplated by the Combination Agreement and without any  further  business
       activities), MergerCo (a wholly-owned subsidiary of Holdco) and OCI N.V, OCI N.V. will contribute its wholly owned  subsidiaries  carrying
       out the OCI Business to Holdco. MergerCo will then merge with and into CF, with CF surviving  as  a  direct  or  indirecty  subsidiary  of
       Holdco. After completion of the Transaction CF will acquire sole control over OCI Business.

    6) The Transaction therefore constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

       UNION DIMENSION

    7) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000  million  (CF:  EUR  3  983  million,  OCI
       Business: EUR [CONFIDENTIAL - OCI Business worldwide turnover] million).[4] Each of them has an EU-wide turnover  in  excess  of  EUR  250
       million (CF: EUR [CONFIDENTIAL – EU TURNOVER] million, OCI Business: EUR [ CONFIDENTIAL - OCI Business eu turnover]  million), but they do
       not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State.

    8) The notified operation therefore has a Union dimension.

       RELEVANT MARKETS AND COMPETITIVE ASSESSMENT

    9) The Parties produce and distribute a number of nitrogen-based chemicals. These products are either sold as nitrogen-based  fertilizers  or
       further processed to produce other nitrogen-based fertilizers and chemicals. Certain chemical products (such as nitric acid  and  ammonia)
       are also used in non-agricultural applications.

   10) More precisely, the Parties' activities overlap in  the manufacturing  and  distribution  of  nitric  acid,  ammonia  and  nitrogen  based
       fertilizers.[5]

1 Product market definitions

1 Nitric Acid

   11) Nitric acid is a pale straw to colourless liquid with a strong odour, slightly viscous and midly to highly corrosive depending on the acid
       concentration . Typical uses of nitric acid are in the manufacture of fertilizers, the production of intermediates for  polyurethanes,  of
       adipic acid, of dyestuffs and of explosives.

   12) Nitric acid is produced and supplied in different concentrations: (i) weak nitric acid (with a concentration between 54% and  65%),  which
       is mainly used for fertilizer production, surface treatment of metals and manufacture of cleaning  agents;  (ii)  azeotropic  nitric  acid
       (with a concentration of approximately 68%), which is mainly employed for the  production  of  isocryanates  and  adipic  acid  and  (iii)
       concentrated nitric acid (with a concentration of 98% to 99%), which is used for the  production  of  TDI  polyurethanes,  nitrocellulose,
       explosives, additives for diesel oil, and nitration reactions in general.

   13) In previous decisions,[6] the Commission defined separate product markets for each of the three types  of  nitric  acids  described  above
       given the lack of demand side substitutability, each type of nitric acid having different applications and prices, and  the  very  limited
       supply side substitutability.

   14) The Notifying Party submits that a distinction can be made between the three types of nitric acid, although the product market  definition
       can ultimately be left open.

   15) In any event, the Commission considers that for the purposes of the present case, the exact definition of the market for nitric  acid  can
       be left open, as it does not ultimately influence the competitive assessment of the Transaction.

2 Ammonia

   16) Ammonia comprises anhydrous ammonia and aqueous ammonia.  Anhydrous  ammonia  is  a  gaseous  material  at  ambient  temperature  that  is
       refrigerated or compressed and stored as a liquid. It is manufactured by reacting nitrogen from the air with hydrogen in the presence of a
       catalyst at high temperature and high pressure. Aqueous ammonia is anhydrous ammonia dissolved in demineralised water,  typically  25%  of
       ammonia and 75% of water.

   17) Ammonia can be used as an input for the production of nitrogen-based fertilizers,[7] but also be sold directly as fertilizer (by injection
       in the soil) it in the soil as compressed gas) and for industrial applications. In  the  EEA,  ammonia  is  sold  almost  exclusively  for
       industrial purposes.[8] For instance, ammonia can be sold for the manufacture of pharmaceuticals, dyes, plastics and man-made fibres,  for
       heat treatment of metals, nitrogen-oxides (NOx) abatement in industrial boilers and power plants, and as a refrigerant.

   18) In a previous decision,[9] the Commission defined distinct markets for anhydrous and aqueous ammonia in light of the low demand and supply-
       side substitutability between the two products.[10] As to anhydrous ammonia, the Commission concluded that a further distinction could  be
       made for ammonia for industrial purposes, generally supplied by  trucks,  and  ammonia  for  fertilizer  production,  which  is  generally
       delivered in large quantities through an import terminal.

   19) The Notifying Party is of the view that it is not necessary to conclude on the distinction between anhydrous and aqueous ammonia.

   20) For the purposes of the present case, the Commission considers that the relevant product market definition for ammonia can be  left  open,
       since no serious doubts as to the compatibility of the Transaction with the internal market arise, whatever the product market definition.

3 Nitrogen-based fertilizers

   21) Nitrogen is one of the primary plant nutrients which are needed in large quantities for agricultural applications as a fertilizer.[11]

   22) A distinction can be made between fertilizers in single nutrient form ("straight nitrogen") or in a complex form  which  may  contain  any
       combination of nitrogen, phosphorus and potassium. This combination  may  be  achieved  by  chemical  means  (“compound  fertilizers”)  or
       mechanically (“blended fertilizers”). There are various types of straight nitrogen fertilizers, which vary in their chemical  composition,
       production mode and in particular in their content of nitrogen, such as ammonium nitrate (AN), calcium ammonium  nitrate  (CAN)  and  urea
       ammonium nitrate solution (UAN).

   23) Another distinction can be made between "field" and “specialty” application. Field fertilizers, such as urea, AN and CAN, are spread on  a
       field and diluted progressively by rain or irrigation water. Specialty fertilizers, such as UAN, are fully water-soluble fertilizers  that
       are manufactured to a high degree of purity.

   24) In previous decisions,[12] the Commission has left open whether any sub-segmentation for nitrogen-based fertilizers, and in particular,  a
       distinction between straight and compound/blended fertilizers, is appropriate. Moreover, the  Commisison  has  ultimately  left  open  the
       questions of whether (i) field fertilizers are distinct from specialty fertilizers and (ii) different  types  of  straight  nitrogen-based
       fertilizers (e.g., urea, ammonia and UAN) constitute separate product markets.

   25) The Notifying Party submits that all nitrogen based fertilizers should be considered part of a single product market, although the product
       market definition can be left open.

   26) For the purpose of present case, the relevant product market definition for nitrogen based fertilisers can be left open, since no  serious
       doubts as to the compatibility of the Transaction arise, whatever the product market definition.

2 Geographic market definitions

1 Nitric Acid

   27) In previous decisions,[13] the Commission left the relevant geographic market definition for weak nitric acid open, but noted that several
       factors pointed to the existence of national or regional (supra-national) geographic markets.

   28) The Parties's activities only overlap in relation to weak nitric acid. In case of a national  market  definition,  their  activities  only
       overlap in Ireland. The Notifying Party submits that the market for weak nitric acid is wider than national and covers the broader Western
       European region. According to the Notifying Party, this is demonstrated by the fact that there is no production of nitric acid in Ireland,
       and consequently Irish customers source their needs from imports, which therefore represent 100% of national demand.

   29) Moreover, the Notifying Party claims that nitric  acid  is  a  commoditized  product;  imports  are  not  subject  to  tariffs,  marketing
       authorizations or any other special regulations and that a number of producers (among which Azelis, Borealis, Eurochem, Ineos  and  Yara),
       with facilities located across Western Europe import or have the capacity  to  import  their  product  into  Western  European  countries,
       including Ireland.

   30) The Notifying Party further submits that in any event, the relevant geographic market definition can be left open because the  Transaction
       does not raise any competitive concerns with regard to the production and sale of nitric acid.

   31) The market investigation investigation revealed that weak nitric acid are usually  transported  by  ship,  truck  or  rail  to  industrial
       customers. Transportation costs are high and the distance over which the products can be transported varies depending on  the  region  and
       transport infrastructure.

   32) As to the situation in Ireland, the market investigation showed that currently there is no  production  of  nitric  acid  in  the  country
       (following the closing down, about ten years ago, of a chemical company which was producing nitric acid in Ireland) and  consequently  all
       volumes are contracted, either directly or through distributors, from abroad, mainly from the  United  Kingdom  and  the  Continental  EEA
       (Belgium, Denmark, the Netherlands, Luxembourg, Austria, Finland, Norway and Sweden). The  lack  of  local  production  does  however  not
       provide conclusive evidence regarding the scope of the geographic market.

   33) Transport costs play therefore an important part of the product's final costs. Based on  the  prices  with  and  without  transport  costs
       charged by the Parties to Irish customers in 2014, transportation costs represent approximately [30-60]%  of  final  price.  According  to
       market participants, travel costs for volumes coming from the Continental EEA are estimated to be around  15%  higher  due  to  the  extra
       ferry, or Channel Tunnel crossing.[14]

   34) As a result, customers in Ireland try to reduce the distance their nitric acid supplies will have to  travel,  while  competitors  in  the
       Continental EEA do not actively try to come into the market, since the  economics  and  the  high  transport  costs  are  not  interesting
       commercially. It has to be noted, however, that the market investigation confirmed that there are no administrative or regulatory barriers
       to entry for nitric acid, which can be traded and transported without any restrictions within the EEA.

   35) In the light of the results of the market investigation, whether in the present case the relevant geographical market for weak nitric acid
       is national or wider can be left open since the Transaction would not give raise to serious  doubts  as  to  its  compatibility  with  the
       internal market under the narrowest possible geographical market, which is national.

2 Ammonia

   36) For anhydrous ammonia, the Commission has in the past found that, whilst the supply of large quantities (to the  fertilizer  industry  for
       example) is global as the product can be shipped worldwide in large vessels, the geographic scope of the market of anhydrous  ammonia  for
       smaller industrial customers comprised a region narrower than the EEA. In a previous case, the Commission considered North Western Europe,
       comprising of France, Germany, Denmark, Belgium, the Netherlands and Luxembourg, as the relevant geographical market due  to  the  intense
       transportation infrastructure in that area.[15]

   37) As to aqueous ammonia, which is mainly delivered to customers by truck, the Commission left  open  the  precise  market  definition,  even
       though its market investigation supported North Western Europe as a relevant geographic market.[16]

   38) The Notifying Party is of the view that the precise geographic scope of the market for ammonia does not need to be defined for the purpose
       of assessing theTransaction.

   39) In the light of the outcome of the market investigation, the relevant geographic market definition for ammonia can be  left  open  in  the
       present case, since no competition concerns arise, whatever the geographic market definition.

3 Nitrogen-based fertilizers

   40) In previous decisions concerning nitrogen fertilizers, the Commission found that the relevant geographic market is at least  EEA-wide  and
       possibly wider in scope, given that nitrogen-containing fertilizers are largely traded at global level[17] and levels of imports into  the
       EEA are high.[18]

   41) The Notifying Party submits that all nitrogen fertilizer product segments are global in scope, but it  is  not  necessary  to  define  the
       precise scope of the geographic market, since the transaction does not raise any competitive concerns.

   42) In this case, the relevant geographic market definition for nitrogen based fertilizers can be left open, since no serious doubts as to the
       compatibility of the Transaction with the internal market arise, whatever the geographic market definition.

3 Competitive assessment

1 Nitric Acid

   43) For the manufacturing and distribution of weak nitric acid, and depending on the geographical market definition, the  Parties'  activities
       overlap in Ireland, in case of a national market definition and in North Western Europe, in case of a wider, (supra-national) regional .

   44) The Notifying Party submits that nitric acid is an intermediate product, and most of it is used  captively  in  the  production  of  other
       chemicals. Therefore, there is very little trade of nitric acid and market data available in relation to the open market.

   45) Based on available data, the Parties' combined market share for weak nitric acid within North Western Europe[19] would amount to  [10-20]%
       (CF: [10-20]%, OCI Business: [0-5]%).[20]

46) The Notifying Party submits that the Parties are  not  able  to  provide  market  data  and  shares  estimates  for  Ireland  where  CF  sold
   [CONFIDENTIAL – VOLUME OF SALES] mt and OCI Business [ CONFIDENTIAL – VOLUME OF SALES] mt (out of [ CONFIDENTIAL – VOLUME OF SALES] mt sold in
   the EEA in 2014). The Notifying Party, however, stresses that other competitors sell or have the ability to sell into  Ireland  (for  example,
   Azelis and Yara).

   47) In any event, the market investigation also revealed that the Transaction will not give rise to competitive concerns  for  the  supply  of
       weak nitric acid in Ireland, the only EEA country where both Parties were active in 2014.

   48) First, during the market investigation, it became apparent that the biggest challenge Irish consumers of weak  nitric  acid  face  is  the
       absence of a local producer, which is unrelated to the Transaction. Indeed, there was one such producer, who was supplying the majority of
       the Irish demand, but stopped operating more than a decade ago. Following that, some consumers turned to  the  nearest  available  sources
       located in the United Kingdom, and in particular GrowHow's (now CF's) plant in Billingham.[21]

   49) Second, OCI's activities in Ireland are limited to the supply to one distributor. Indeed, following the  closure  of  the  Irish  chemical
       producer's plant in 2004, only one customer, which already had commercial relationships with OCI on other products, started  sourcing  its
       weak nitric acid from OCI. Since then and up to date, this distributor of chemicals has been the only Irish  customer  of  OCI.  In  2014,
       OCI's sales to this customer represented less than 1% of OCI's weak nitric acid sales, the remaining 99% being sold in the Netherlands.

   50) OCI is not therefore a close competitor of CF for the supply of weak nitric acid  in  Ireland.  Other  suppliers  of  nitric  acid  having
       facilities in the United Kingdom, where CF sells the majority of its weak nitric acid  production,  like  Azelia  and  Ineos,  are  closer
       competitors to CF.

   51) Third, the market investigation revealed that if CF was to raise prices post-Transaction, customers would look for alternative sources  of
       supply coming from the Continental EEA, including in particular Yara which owns a plant in the Netherlands, where OCI's plant is  located.
       Nitric acid is perceived by market participants as a commoditized product for which there is no regulatory barriers that could  prevent  a
       supplier active in Continental EEA from  entering the Irish market.

   52) Finally, if customers highlighted during the market investigation that few players are actually supplying weak nitric acid  into  Ireland,
       they did not express any concerns as to the impact of the Transaction, combining CF and OCI's plants, on this market.

   53) In the light of the above and in view of the information available to it and the outcome  of  the  market  investigation,  the  Commission
       concludes that the examined horizontal overlap does not give rise to serious doubts as to the compatibility of the  Transaction  with  the
       internal market for weak nitric acid, in particular in Ireland.

2 Ammonia

   54) The Parties' activities overlap in the manufacturing and supply of both anhydrous and aqueous ammonia.

   55) For anhydrous ammonia,[22] the combined market share of the Parties is [10-20]% at worldwide level (CF: [10-20]% and OCI Business: [0-5]%)
       in terms of volume and value, [10-20]% in the EEA (CF: [5-10]% and OCI Business: [10-20]%) both in terms of volume and value and  [20-30]%
       in North Western Europe in terms of capacity.[23]

   56) The Parties' main competitors are among others Yara ([5-10]% in value and volume at global level, [10-20]% in value and volume in the  EEA
       and [30-40]% in capacity in North Western Europe), Grupa Azoty ([0-5]% in value and volume in the EEA) and Borealis ([10-20]% in  capacity
       in North Western Europe).

   57) For aqueous ammonia, the combined share of the Parties is around [5-10]% in the EEA in terms of volume (with an increment of  [0-5]%)[24],
       while in North Western Europe, it is below 20%.[25] Strong competitors are present on this market, such  as  Yara  which  is  leading  the
       market with [40-50]% of market share in the EEA, followed by BASF ([10-20]%).

   58) In the light of the outcome of the market investigation and mainly in view of the low overall market share and increment and the existence
       of strong competitors at the EEA and Western Europe levels, the Commission concludes that the examined horizontal overlap  does  not  give
       rise to serious doubts as to the compatibility of the Transaction with the internal  market  for  the  supply  of  anhydrous  and  aqueous
       ammonia, under any product market definition.

3 Nitrogen-based fertilizers

   59) If the narrowest possible segmentation of nitrogen-based fertilizers is considered,, the  Parties'  activities  overlap  with  respect  to
       manufacturing of UAN.

   60) At world-wide level, the combined market shares of the Parties are [20-30]% (CF: [20-30]%, OCI Business: [0-5]%) in  volume  and  [30-40]%
       (CF: [30-40]%, OCI Business: [0-5]%) in value. A number of competitors will remain post-Transaction, such as  Yara  ([5-10]%),  MHTP  ([5-
       10]%) and PotaschCorp ([5-10]%). Also, it should be noted that OCI Business does not have sales outside the EEA.

   61) In the EEA, the combined market shares of the Parties are [10-20]% (CF: [0-5]%, OCI Business: [5-10]%) in terms  of  volume  and  [10-20]%
       (CF: [0-5]%, OCI Business: [5-10]%) in terms of value. Yara is market leader with market shares of  [20-30]%  and  [20-30]%  respectively,
       while Achema is third with market shares similar to those of the Parties post-Transaction.

   62) Given the low overall combined market shares and increment, in particular in the EEA, as well as the competitive landscape, the Commisison
       concludes that the examined horizontal overlap does not give rise to serious doubts as to the compatibility of the  Transaction  with  the
       internal market for nitrogen based fertilizers and in particular UAN.

       CONCLUSION

   63) 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

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[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 370, 07.11.2015, p.5.

[4]   Turnover calculated in accordance with Article 5 of the Merger Regulation.

[5]   The Transaction also gives rise to vertical links between the nitrogen-based fertilizers production and (i) the upstream  markets  for  the
supply of ammonia and nitric acid as inputs for the manufacture of fertilizers and (ii) the  downstream  markets  for  fertilizer's  distribution
where CF is active at the retail level and OCI at the trading/wholesale  level.  However,  these  vertical  relationships  do  not  lead  to  any
vertically affected market and therefore will not be further discussed in this decision.

[6]   Case No. COMP/M.4730 - Yara/Kemira Growhow, paras. 91 et seq; Case No COMP/M.6695
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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