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Case No COMP/M.6900 - BOREALIS/ ROSIER/ GPN

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REGULATION (EC) No 139/2004

MERGER PROCEDURE

Article 6(1)(b) NON-OPPOSITION

Date: 03/06/2013

In electronic form on the EUR-Lex website under document number 32013M6900

Office for Publications of the European Union L-2985 Luxembourg

EUROPEAN COMMISSION

Brussels, 3.6.2013 C(2013) 3431 final

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 Where possible the information omitted has been replaced by ranges of figures or a general description.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,

Subject: Case No COMP/M.6900 – BOREALIS/ ROSIER/ GPN

Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004

(1) On 26 April 2013, the European Commission received the notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/2004 by which Borealis AG ("Borealis", Austria), referred to as the "notifying Party", ultimately controlled by OMV AG and the International Petroleum Investment Company PJSC, plans to acquire within the meaning of Article 3(1)(b), directly or indirectly through its subsidiary Borealis France SAS ("Borealis France", France) or another legal entity controlled by Borealis AG, the sole control over Rosier S.A. ("Rosier", Belgium) and GPN S.A. ("GPN", France), by way of purchase of shares (Borealis, GPN and Rosier are jointly referred to as "the Parties").

1. THE PARTIES

(2) Borealis is an Austrian company which manufactures fertilisers and industrial products, including aqueous ammonia, AdBlue and weak nitric acid. Borealis is active mainly in the EU but also globally.

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 24, 29.1.2004, p. 1 (the "Merger Regulation").

Commission européenne, 1049 Bruxelles, BELGIQUE / Europese Commissie, 1049 Brussel, BELGIË. Tel.: +32 229-91111.

(3) GPN is a French company, wholly owned by Elf Aquitaine Fertilisants S.A. which in turn is controlled by Total Group. GPN manufactures and distributes single-nutrient fertilisers and industrial products, including aqueous ammonia, AdBlue and weak nitric acid. GPN is active mainly in the EU.

(4) Rosier is a Belgian company controlled by Elf Aquitaine S.A. which in turn is controlled by Total Group. Rosier manufactures and markets complex mineral fertilisers.

2. THE OPERATION

(5) The proposed transaction consists in the acquisition by Borealis France of 100% of GPN's shareholding and voting rights and 56.86% of Rosier's shareholding. The acquisition of Rosier by Borealis is conditional upon the acquisition of 100% of GPN. Post transaction Borealis will have the sole control over both GPN and Rosier. Therefore, the proposed transaction constitutes a single concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

3. EU DIMENSION

(6) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 (Borealis: EUR 7 545 million; GPN EUR 483 million; Rosier EUR 279 million). Both Borealis and GPN have an EU-wide turnover in excess of EUR 250 million (Borealis: EUR [….] million; GPN EUR [….] million). Although GPN achieves more than two thirds of its aggregate EU-wide turnover in France, Rosier and Borealis do not. Therefore, the notified operation has an EU dimension pursuant to Article 1(2) of Merger Regulation.

4. ASSESSMENT

4.1. Relevant product market

(7) The Parties overlap on the markets for the production of straight and complex fertilisers, distribution of fertilisers to retailers, AdBlue, azeotropic nitric acid, urea for industrial purposes, anhydrous ammonia, aqueous ammonia and weak nitric acid. However, only the markets for aqueous ammonia and weak nitric acid are affected within the meaning of the Merger Regulation.

(8) In addition, the Parties produce raw carbon dioxide (CO2) as a by-product of their main manufacturing activities. Raw CO2 cannot be transported and must be liquefied at the Parties’ plants which, in this case, is done by third parties under long-term contacts. Therefore, in accordance with the Commission's previous practice the Parties' activities do not overlap in the production of raw CO2.

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

4 See Case No. COMP/M.4730 Yara/Kemira Growhow, para. 149.

4.1.1. Aqueous ammonia

(9) Aqueous ammonia is anhydrous ammonia dissolved in demineralised water, typically 25% of ammonia and 75% of water.

(10) The notifying Party submits that anhydrous ammonia and aqueous ammonia should be considered a single product market. From the supply-side point of view the notifying Party submits that the process of producing aqueous ammonia is simple, that a producer of anhydrous ammonia can start producing aqueous ammonia by building additional installations which takes approximately 15 months and costs around EUR 3 million. Moreover, the Parties submit that from the demand side, the two products are partly substitutable as industrial users may freely choose between anhydrous and aqueous ammonia with equal efficiency when setting up their production plants.

(11) In previous decisions the Commission has considered aqueous ammonia as a separate product market. The market investigation has confirmed the Commission's previous findings.

(12) Indeed, although aqueous ammonia consists of anhydrous ammonia dissolved in demineralised water, from a demand side perspective the two products are not substitutable because anhydrous ammonia is a hazardous material and requires significantly higher investments in facilities and security than aqueous ammonia.

(13) As regards the notifying Party's claim that industrial users can freely choose between anhydrous ammonia and aqueous ammonia, the replies to the market investigation have shown that this is not an option for them once they have established their plants. Moreover, certain industrial plants located close to residential areas are required under the relevant environmental legislation to use the less hazardous aqueous ammonia and therefore have no free choice even when setting up their plants.

(14) With regards to supply side substitutability the notifying Party stated that building an additional dilution installation to produce aqueous ammonia from anhydrous ammonia takes significant time (15 months) and entails substantial costs (EUR 3 million). The market investigation confirmed that the time and the cost for setting up a dilution unit are significant. Moreover, the costs are generally higher if the dilution unit is located far from the anhydrous ammonia plant as an additional storage facility is required in that case.

(15) In any case, the notifying Party provided data on the narrowest segmentation and the transaction does not raise serious doubts under any possible market definition.

4.1.2. Week nitric acid

(16) Weak nitric acid is a low-concentrated solution of nitric acid (between 54% and 65%), whose main application relates to fertilizers production. It is usually transported by truck or rail to industrial customers.

5 See Case No. COMP/M.4730 Yara/Kemira Growhow, para. 75.

(17) Weak nitric acid is part of the broader group of nitric acids (HNO3 which comprise weak nitric acid, azeotropic acid and concentrated nitric acid). In its previous decisions the Commission has considered the weak nitric acid a separate product market.

(18) The notifying Party disagrees with this definition and submits that azeotropic and weak nitric acid are substitutable as producers and customers of azeotropic nitric acid can easily further dilute the product to obtain weak nitric acid. Nevertheless, they provided data on the narrowest segmentation.

(19) The Commission considers that there is no need to conclude on the precise product market definition for week nitric acid in this case since the transaction does not raise serious doubts under any possible market definition.

4. 2. Relevant geographic market

4.2.1. Aqueous ammonia

(20) In its previous decisions the Commission has indicated that due to the high transport costs the geographic market for aqueous ammonia can in general be defined as national and possibly broader for the North Western European countries (comprising Benelux, France, Germany and Denmark) due to the dense transportation infrastructure and the high concentration of both producers and customers. The notifying Party has provided data both at national level, as well as on North Western European level.

(21) The replies to the market investigation in this case confirmed that the transport costs of aqueous ammonia are high. Nevertheless, they confirmed the possibility of importing aqueous ammonia from other North European countries, mainly from Belgium and the Netherlands.

(22) The Commission considers that the precise geographic market definition for aqueous ammonia can be left open in this case, since the transaction does not raise serious doubts under any possible market definition.

4.2.2. Week nitric acid

(23) As regards the weak nitric acid, in previous decisions the Commission has considered that the geographic market is mainly national, possibly wider in case of North Western Europe. In a more recent decision, the Commission also took into account a possible geographic market within a radius of 1000 km around each plant.

6 Case No COMP/M.4730 – Yara/Kemira Growhow, para. 90. Case No COMP/M.6695 – Azoty Tarnow/Zaklady Azotowe Pulawy, para. 29.

7 Case No COMP/M.4730 – Yara/Kemira Growhow, para. 76.

8 Case No COMP/M.4730 – Yara/Kemira Growhow, para. 93.

9 Case No COMP/M.6695 – Azoty Tarnow/Zaklady Azotowe Pulawy, para. 32.

(24) In any event, the precise geographic market definition for weak nitric acid can be left open in this case, since the transaction does not raise serious doubts under any possible market definition.

4.3. Competitive assessment

4.3.1. Aqueous ammonia

(25) Both GPN and Borealis sell aqueous ammonia from their plants located in the North of France (Borealis from Ottmarsheim and GPN from Grandpuits and to a lesser extend from Mazingarbe). Borealis has also a plant in Austria (more precisely in Linz). Rosier is not active in this market. On a national level the GPN and Borealis overlap in France and on a wider level in North Western Europe.

(26) In France, the combined market share of the Parties would reach [40-50]% in volume (Borealis [10-20]%, GPN [20-30]%) and [40-50]% in value (Borealis [10-20]%, GPN [20-30]%) according to the notifying Party's estimations. The notifying Party submits that there is no transparency in this market and it is very difficult to estimate exactly the market shares of their competitors. According to their best estimates, their main competitor Yara has a market share of [40-50]% both in volume and in value. The other two suppliers on the French market according to the notifying Party are Brenntag with [10-20]% market share both in volume and in value and BASF with a [5-10]% market share both in volume and in value.

(27) As stressed by the notifying Party, the French market for aqueous ammonia is a small market (193 KT in 2012, equivalent to EUR 26 million) and there is a significant level of imports mainly from Belgium and from the Netherlands (23% of total French consumption in 2011). In addition, customers multisource, the contracts are concluded on short term and switching is common as it does not entail any significant cost for customers.

(28) The notifying Party further submits that there is competitive pressure from companies producing anhydrous ammonia which could switch their production to aqueous ammonia in case the prices for the latter would increase. In this context, the notifying Party submits that more than 70% of the European producers of anhydrous ammonia can also sell aqueous ammonia. However as explained in the section on product market definition the market investigation does not support this claim.

(29) The replies to the market investigation confirmed the level of imports of aqueous ammonia into France estimated by the notifying Party. There are also customers located in France that confirmed that they do purchase aqueous ammonia from suppliers located in neighbouring countries like Belgium or the Netherlands. Moreover, also distributors located outside France, in particular in Belgium, do export into France an important quantity of aqueous ammonia. This is in line with the notifying Party data on imports into France, which show that half of imports into France come from Belgium. As regards multisourcing, the replies to the market investigation confirmed that the majority of customers indeed multisource for two

10 See replies to question no 9 to Q2 - Questionnaire to customers.

11 See replies to question no 15 to Q2 - Questionnaire to customers.

(30) In addition, the lack of market transparency, deterrent power (due to capacity constraints) and the presence of potential competitors in neighbouring markets make difficult any possible attempt of coordination by the leading players post-merger.

(31) Taking into account the easiness to switch suppliers within a short period of time, the existence of other alternative suppliers and the competitive constraints coming from neighbouring countries, mainly from Belgium and the Netherlands, the Commission considers that the proposed transaction does not raise serious doubts in relation to aqueous ammonia in France.

(32) Should a wider market be taken into consideration, then in the North Western European area the Parties combined market share would reach only [20-30]% in volume (Borealis [5-10]%, GPN [10-20]%) and [10-20]% in value (Borealis [5-10]%, GPN [10-20]%). The Parties argue that the combined entity would continue to face competition from the market leader, Yara, holding a market share of [40-50]% and from a number other suppliers such as BASF ([10-20]%), Brenntag ([10-20]%), OCI Nitrogen BV ([5-10]%) and SKW ([5-10]%). The replies to the market investigation indicated that indeed in the North of France and in the neighbouring countries, i.e. Belgium, the Netherlands and the adjacent areas of Germany there is a high concentration of suppliers of aqueous ammonia.

(33) Based on the above the Commission considers that the proposed transaction does not raise serious doubts in relation to aqueous ammonia neither in North Western Europe.

4.3.2. Week nitric acid

(34) The notifying Party points out that the parties do not overlap on a national level in the production and sale of week nitric acid (except for a minor overlap in Germany where they would have [10-20]% combined market share with an increment of less that [0-5]%). Moreover, in the possible geographic market defined as a radius of 1000 km the Parties’ combined market share will remain below [10-20]%. The only potentially affected market would be North Western Europe.

(35) On the North Western European market the combined market share of the Parties reaches [10-20]% with a small increment of [0-5]%. The Parties will face strong competition from the market leader, Yara ([20-30]% market share), as well as from other players: BASF ([10-20]%), Brenntag ([10-20]%), Agrofert ([10-20]%), OCI Nitogen ([0-5]%).

12 See replies to question no 20 to Q2 - Questionnaire to customers.

13 See replies to question no 28 to Q2 - Questionnaire to customers.

14 [….]

(36) Taking into account the moderate combined market shares of the merged entity, the limited overlap and, in particular, the existence of several alternative suppliers who will continue to exercise competitive pressure on the merged entity, the proposed transaction does not raise serious doubts in relation to week nitric acid in North Western Europe.

5. CONCLUSION

(37) 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

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