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SHV / ERIKS

M.5563

SHV / ERIKS
July 30, 2009
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REGULATION (EC) No 139/2004 MERGER PROCEDURE

Article 6(1)(b) NON-OPPOSITION Date: 31/07/2009

In electronic form on the EUR-Lex website under document number 32009M5563

Office for Official Publications of the European Communities L-2985 Luxembourg

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 31.7.2009

SG-Greffe(2009) D/ 4772 C(2009) 6205

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 Where possible the information omitted has been replaced by ranges of figures or a general description.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 ARTICLE 6(1)(b) DECISION

To the notifying party

Dear Sir/Madam,

1.On 25 June 2009, the Commission received a notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 by which SHV Holdings N.V. ("SHV", The Netherlands) acquires within the meaning of Article 3(1)(b) of the Council Regulation sole control of ERIKS N.V. ("ERIKS", The Netherlands) by way of purchase of shares.

I. THE PARTIES

2.SHV is the Dutch holding company of a conglomerate whose group companies operate worldwide. SHV has activities in (i) trade and distribution of liquefied petroleum gas (LPG), (ii) trade in food and non-food consumer articles, (iii) provision of private equity (through NPM Capital), (iv) exploration and production of oil and gas, (v) heavy lifting and (vi) renewable energy.

3.ERIKS is the Dutch holding company of a group of technical distribution companies offering mechanical engineering components and associated technical and logistical services to industrial end-users.

II. THE OPERATION AND THE CONCENTRATION

OJ L 24, 29.1.2004 p. 1.

Commission européenne, B-1049 Bruxelles / Europese Commissie, B-1049 Brussel - Belgium. Telephone: (32-2) 299 11 11.

4.The envisaged operation involves the acquisition by SHV of all the outstanding shares of ERIKS through a public offer made on 25 June 2009. The public offer has the support of ERIKS’ management and supervisory boards.

5.As a result, SHV will have sole control over ERIKS.

III. COMMUNITY DIMENSION

6.The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 billion (EUR 12 424 million [SHV: EUR 11 292, ERIKS: EUR 1 132]). Each of them has a Community-wide turnover in excess of EUR 250 million (SHV: EUR […] million; ERIKS: EUR […] million), but they do not achieve more than two-thirds of their aggregate Community-wide turnover within one and the same Member State. The notified operation therefore has a Community dimension.

III. RELEVANT MARKETS

Relevant product markets

7.The envisaged transaction concerns the following markets: (i) supply of industrial sealings where both ERIKS and SHV operate and the vertically related markets for (ii) supply of technical components, namely, (a) control components, (b) round belts, (c) power belts and (d) machined plastics, where ERIKS operates as well as (iii) the vertically related downstream market for supply of automated airport and industrial handling systems where Vanderlande Industries B.V. ("Vanderlande"), indirectly controlled by SHV, is active.

Supply of industrial sealings

8.The market for industrial sealings is identified by the notifying party as the only market where both ERIKS and SHV (through Hertel and Helvoet) operate.

9.In this respect, the notifying party submits that industrial sealings can be made of different materials, including rubber, silicones and metals and that they include: (i) static sealings and gaskets, (ii) hydro pneumatic sealings (including O-rings, oil seals, lip seals), (iii) rubber moulded sealings, (iv) mechanical seals (including packings) and (v) expansion joints. The demand side of the market mainly consists of manufacturers (OEMs), construction and engineering companies and maintenance and repair companies in a wide range of industries. The supply side of the market consists of distributors and manufacturers selling sealing products directly to industrial customers.

10.Moreover, the notifying party argues that suppliers of industrial sealings (including both ERIKS and Hertel) usually offer all types of sealings, or at least a wide range of those and related products. On the demand side, industrial customers usually use a large number of different sealings. For these reasons the notifying party considers that the different types of industrial sealings constitute one single product market.

2Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission Consolidated Jurisdictional Notice (OJ C95, 16.04.2008, p1).

3SHV indirectly controls Hertel and Helvoet through NPM Capital which holds respectively 40.7% shares in the former and 45.8% in the latter.

11.Respondents to the market investigation broadly confirmed the segmentation of industrial sealings in different types as above suggested by the notifying party due to the differences in the production process for each type of sealing. The replies received indicated that switching production from one type of sealing to another, although feasible, would require some technical efforts as they have separate business lines and use different technologies. However, the majority of suppliers replied that if needed they would have the ability to switch production and that for distributors would be even easier to change their offer between various types of sealings. In addition, from a demand side perspective, the majority of customers indicated that each type of sealing is used for a specific application and as a consequence each product is not easily interchangeable. Notwithstanding this, both customers and competitors fully agreed with the notifying party's proposal for one single product market encompassing all types of industrial sealings since the former argue to offer a wide range of sealings and the latter to regularly purchase different types of those products.

12.Finally, the market investigation confirmed, in line with the Commission position in previous decisions, that automotive sealings belong to a separate product market as opposed to that for industrial sealings.

13.In any event, for the purpose of the present decision there is no need to conclude on the relevant product market as the envisaged transaction does not raise competition concerns under any alternative product market definition.

Markets for supply of technical components

14.ERIKS is also active as supplier of some technical components. Thus, in 2008 it provided on a spot basis a limited number of these components to Vanderlande (indirectly controlled by SHV), namely, (i) control components, (ii) round belts, (iii) power belts and (iv) machined plastics.

15.For the purpose of this decision, it is not necessary to conclude on the relevant product markets for each of the above components as under any reasonable market definition no competition concerns arise from the envisaged transaction.

Supply of automated airport and industrial handling systems

16.Vanderlande, indirectly controlled by SHV through NPM Capital, supplies automated handling systems. The latter consists of system engineering in a range of airport and industrial handling applications: (i) baggage handling, (ii) cargo handling, (iii) parcel mechanisation and (iv) automated warehousing. In particular, airport handling consists of undertaking complete projects for the engineering, design, supply, erection and commissioning of systems to handle passenger baggage through the terminal complexes at airports, and freight and cargo handled at specialised cargo facilities.

17.The notifying party submits that airport handling and industrial handling belong to the same product market as the technology used in these two sectors is very similar. In this respect, the same engineering expertise is used to meet project specifications across the range. This is particularly evident in the airport cargo handling which has a number of elements in common with both regular airport handling and with industrial handling.

18.However, the question whether airport and industrial handling systems belong to the same product market can be left open since under any alternative product market definition, no competition concerns arise from the operation at stake.

Relevant geographic markets

Supply of industrial sealings

19.The notifying party submits that the market for industrial sealings is EU or EEA wide since (i) transportations costs are limited, (ii) suppliers like ERIKS, Hertel and Helvoet are usually active in several countries and (iii) purchasers do not source on a purely national basis.

20.Respondents to the market investigation widely confirmed the proposed geographic market definition, as all the suppliers interviewed stated that they were active at least on an EEA-wide level and some of them even outside the EEA. In addition, it appeared from the replies received that sealings can be easily transported to different geographic areas due to their limited weight and that transportation costs do not account for a significant portion of the final price (on average [0-10]%), therefore, the vast majority of suppliers do not consider transport costs to be a barrier to trade at least within the EEA. In addition, distribution and logistics are organised mainly on the basis of EU structures and are even worldwide in some cases.

21.The majority of customers interviewed in turn confirmed that they source sealings from different countries within the EU and some also on a global basis and that they would be willing to switch suppliers among those active within the EU based on price considerations. In this respect, respondents to the market investigation pointed out the presence of several players competing in this market. Finally the majority of customers submitted that requirements for sealings in terms of product characteristics and end-use do not differ depending on the purchasers' location.

22.In any case, it is not necessary to ultimately conclude on the geographic scope of the market as under no reasonable market definition the transaction gives rise to competition concerns.

Markets for supply of technical components

For the purpose of the present decision there is no need to decide on the geographic scope of the markets for technical components supplied by ERIKS, namely, (i) control components, (ii)

round belts, (iii) power belts and (iv) machined plastics as under any reasonable geographic market definition, no competition concerns would arise from the transaction.

Supply of automated airport and industrial handling systems

24.The notifying party considers, in line with the Commission practice that the geographic market for airport and industrial handling systems is at least EEA-wide. There are no special circumstances that would necessitate reviewing this market definition for the present case, therefore the competitive assessment of the envisaged transaction with respect to this market will focus on the EEA.

IV. COMPETITIVE ASSESSMENT

Based on the above, the proposed transaction gives rise to a limited horizontal overlap between the parties' activities in the market for supply of industrial sealings. Moreover, it results in the following vertically affected markets: the upstream markets for the supply of technical components - (i) control components, (ii) round belts, (iii) power belts and (iv) machined plastics - where ERIKS operates and the downstream market for the supply of automated airport handling systems in which Vanderlande is active.

Horizontal issues

25. On the EU market for industrial sealings, which the market investigation has confirmed to be the relevant market, the transaction will lead to a combined market share among ERIKS, Hertel and Helvoet well below 15% for each type of sealings where they are active, as showed below.

Hertel

Helvoet

TOTAL

Type of Sealing (non-automotive)

Market size (€ x Sales Market)

(€ x mln)

Static sealings & […] [5-10]% […] [0-5]% […] <[0-5]% <[5-10]%

([250-750])

Hydro pneumatic […] [5-10]% […] <[0-5]% […] <[0-5]% <[5-10]%

([500-1500])

7 See footnote 7.

8 ERIKS is not active on the market for sealings for the automotive sector therefore as no horizontal overlap arises there is no need to assess it further.

Mechanical seals […] <[0-5]% -

-

[…] <[0-5]% <[0-5]%

([500-1500])

Expansion joints

[…] <[0-5]% […] <[0-5]% […] <[0-5]% <[0-5]%

([100-500])

[…] [0-5]% […] <[0-5]% […] <[0-5]% <[5-10]%

Total […] Source: form CO

26. In addition, as submitted by the notifying party and confirmed by the market investigation, there are bigger players competing with the parties such as Klinger Group ([20-30]% on the EU market for static sealings & gaskets), Trelleborg ([20-30]% on the EU market for hydro pneumatic sealings), John Crane ([50-60]% on the EU market for mechanical seals) and Vedeb-Witzenmann ([5-10]% on the EU market for expansion joints).

28.27. Moreover, even assessing the proposed transaction under the narrowest geographic market (i.e. The Netherlands, where the parties' activities overlap the most), their combined post-merger market share would be well below 15% for each of the above categories of industrial sealings. The only exception would be in relation to the market for static sealings and gaskets where the parties' joint market share in The Netherlands would be [20-30]% (ERIKS: [10-20]%, Hertel: [5-10]% and Helvoet: [0-5]%). However, as respondents to the market investigation broadly confirmed, there are alternative suppliers active on the market to which customers could switch in case of a price raise.

28. In the light of the above, the envisaged transaction does not raise serious doubts in the market for industrial sealings.

Vertical relationships

29. The notifying party submits that for each of the upstream markets for the supply of technical components namely, (i) control components, (ii) round belts, (iii) power belts and (iv) machined plastics, ERIKS would have a market share not exceeding 25% under the narrowest product and geographic market definition (i.e. the Dutch market).

Product

Market size

ERIKS’ market share

9 Pursuant to the notifying party's submissions, the parties' market share for each type of industrial sealing in The Netherlands would be as follows: (i) hydro pneumatic sealings: ERIKS: [5-10]%, Hertel: less than [0-5]%, Helvoet [0-5], (ii) mechanical seals: ERIKS: [0-5]%, Hertel: [0-5]%, Helvoet: [0-5]%, (iii) expansion joints: ERIKS: [0-5]%, Hertel: [0-5]%, Helvoet [0-5]%.

10 With respect to the potential market for control components even considering as separate product markets (a) frequency transmitters, (b) integrated electronics, (c) servo amplifiers and (d) linear actuators, that is to say, the components purchased once by Vanderlande, ERIKS' market share would be still well below 15%. Thus, the value of the total sales of all control components of ERIKS amounts to EUR […] million while the wholesale value of each of the above listed product categories is at least EUR […] million. Only in relation to the value of integrated electronics, ERIKS is not able to provide figures as these components are always integrated and according to the former they do not constitute a separate category of products.

(NL) EUR [0,5-2] billion EUR [1-2] billion EUR [10-50] million EUR [0,5-1,5] billion

control components round belts power belts machined plastics

[0-5]% <[5-10]% [20-30]% <[5-10]%

Note: Market shares are parties' estimates

30. In addition, it appears from the notifying party's submissions that each of the product markets for technical components is characterised by the presence of several players constraining ERIKS, such as Siemens (which is the main player on the Dutch market for control components with a market share of [40-50]%), Volta ([30-40]% on the Dutch market for round belts), Optibelts ([30-40]% on the Dutch market for power belts) and Vink ([10-20]% on the Dutch market for machined plastics) and some others.

31. On the downstream market for airport and industrial handling systems taken as a whole, Vanderlande (which is a SHV's subsidiary) has a market share of [10-20]% in the EEA. Major competitors in this sector are: Dematic ([10-20]%), SSI Schaefer ([5-10]%), FKI (Logistex, [5-10]%) and other smaller players.

32. If (i) airport handling and (ii) industrial handling are considered as distinct product markets, Vanderlande would have a market share of [30-40]% in the former whilst of [5-10]% in the latter both at EU level.

33. Despite Vanderlande's market share in relation to airport handling systems, it should however be noted that in this sector market shares are very volatile as the sales are mainly linked to large projects. Indeed, market shares can substantially vary depending on the outcome of a single tender. In this respect, it appears that Vanderlande has increased its market share thanks to the provision of handling systems for the new terminals in Barcelona and Heathrow (respectively awarded in 2002 and 2004). In this respect, the notifying party argues that Vanderlande's market share without the turnover generated by these two projects (EUR […] million) would be [10-20]%. As a consequence, present market shares cannot be considered as absolutely faithful indicators of long term market power. In addition, there are strong competitors active on this market such as Siemens ([20-30]%), FKI (Logistex, [10-20]%), Alstec (Babcock, [10-20]%) and others smaller. Finally, it should also be pointed out that from the demand side, customers in this sector have a significant buying power.

34. Furthermore, the notifying party stresses that despite the vertical relationship Vanderlande would not have the ability to foreclose access to the market for the supply of airport handling systems to the detriment of ERIKS' rivals on the upstream markets for technical components due the to the negligible value (less than EUR […]) of its purchases for each of these technical components. The only exception would be in relation to its purchases of machined plastics (whose value is EUR […]). However, also in this case, even if Vanderlande were to buy its entire need for machined plastics (approximately EUR […]) from ERIKS post-merger, the value of this purchase would still be less than [0-5]% of the total market for machined plastics .

11 The notifying party submits that the size of the Dutch market for machined plastics amounts to EUR […] billion.

35. As a consequence, a risk of customer foreclosure is very unlikely. The same applies to any concerns of input foreclosure based on the limited market shares of ERIKS (not exceeding 25%) on each of the upstream markets for the supply of technical components and the presence of various competitors.

36. It can be concluded from the above that the concentration would not significantly impede effective competition in any of the markets concerned.

V. CONCLUSION

37. For the above reasons, the concentration does not raise serious doubts as to its compatibility with the common market and with the EEA Agreement and it does not significantly impede effective competition. Thus, the Commission has decided not to oppose the notified operation and to declare it compatible with the common market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of Council Regulation (EC) No 139/2004.

For the Commission (signed) Antonio TAJANI Vice-President of the Commission

8

EUC

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