EUROPEAN COMMISSION DG Competition

Case M.11583 - MARCEGAGLIA STEEL / ASCOMETAL FOS -SUR-MER

Only the English text is available and authentic.

REGULATION (EC) No 139/2004 MERGER PROCEDURE

Article 7 Date: 24/5/2024

EUROPEAN COMMISSION

Brussels, 24.5.2024 C(2024) 3620 final

PUBLIC VERSION

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 Where possible the information omitted has been replaced by ranges of figures or a general description.

Marcegaglia Steel S.p.A. Via Bresciani, 16 46040 Gazoldo degli Ippoliti (MN) Italy

Dear Sir or Madam,

(1) We refer to your application for a derogation from the suspension obligation provided for in Article 7(1) of Council Regulation (EC) No 139/2004 (the ‘Merger Regulation’) with regard to the proposed acquisition by Marcegaglia Steel S.p.A. (‘Marcegaglia’, Italy) of Ascometal Fos-sur-Mer S.A.S. (the ‘Target’, France; together with Marcegaglia hereinafter referred to as the ‘Parties’) (the ‘Transaction’) submitted pursuant to Article 7(3) of the Merger Regulation on 17 May 2024.

1. THE PARTIES AND THE TRANSACTION

(2) Marcegaglia is an Italian industrial group in the steel processing sector, with a focus on trading and processing of steel. It mainly produces carbon steel products, but also, to a smaller extent, stainless steel flat and long products.

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’).

Commission européenne/Europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel. +32 22991111

(3) The Target, headquartered in France, is part of the Ascometal group that specialises in the production of specialty steel products. The Target operates a plant near Marseille, France, that produces bearing steels and mechanical engineering steels.

(4) The Transaction concerns a potential acquisition of indirect sole control by Marcegaglia over all businesses and assets, such as intangible assets, tangible assets, ongoing orders and contracts, as well as contracts with certain employees ([…]) of the Target.

(5) Therefore, the Transaction appears to qualify as a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

2. THE EU DIMENSION

(6) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 2 500 million (Marcegaglia: EUR […]; and the Target: EUR […]). Each of them has an EU-wide turnover in excess of EUR 100 million (Marcegaglia: EUR […]; and the Target: EUR […]), they have a combined aggregate turnover in excess of EUR 100 million in each of three Member States, and each of them has an aggregate turnover in excess of EUR 25 million in each of these three Member States, and none of them achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State. The Transaction therefore has an EU dimension within the meaning of Article 1(3) of the Merger Regulation.

3. THE APPLICATION FOR DEROGATION

(7) On 17 May 2024, Marcegaglia submitted a derogation request pursuant to Article 7(3) of the Merger Regulation to implement the Transaction before it is notified to, and declared compatible with the internal market by, the Commission (the ‘Derogation Request’).

(8) According to information provided by Marcegaglia, in recent years, the Ascometal group has been experiencing financial difficulties, aggravated by the outbreak of the Covid-19 pandemic, the challenging situation in the steel industry and the raise of energy costs. On 27 March 2024, the Judicial Court of Strasbourg opened judicial reorganization proceedings in respect of all companies of the Ascometal group, including the Target. The Judicial Court of Strasbourg appointed, inter alia, insolvency administrators and set the deadline to submit an offer for the Target on 25 April 2024. Pursuant to Article L. 642-2, V of the French Commercial Code and the specifications for the submission of offers issued by the Judicial Court of Strasbourg, the offers submitted within the reorganization proceedings in respect of the Target must be unconditional, i.e. they cannot be subject to any condition precedent at the latest at the hearing for the examination of the submitted offers (‘Endorsement Hearing’). Conditional offers will be declared inadmissible by the Judicial Court of Strasbourg. The Judicial Court of Strasbourg arranged the

3 […]. 4 The Target’s declaration of cessation of payments stipulates that it has been impossible for the Target to meet current liabilities using available assets on 26 March 2024. This declaration attaches, among others, the Target’s audited accounts for 2022 as proof of the Target’s difficult financial situation leading up to the Target’s declaration of cessation of payments. 5 Judgment of the Judicial Court of Strasbourg N° PC RQ 178/24 of 27 March 2024.

Endorsement Hearing to take place on 30 May 2024. During this Endorsement Hearing, the Judicial Court of Strasbourg judge will examine the unconditional offers submitted for the Target in light of several criteria, such as the lasting employment attached to the business to be sold, the payment of creditors or the guarantees in terms of implementation. The judge can then select a bidder and authorise the acquisition of the Target by an endorsement ruling. In its ruling, the Judicial Court of Strasbourg will set a date on which the successful bidder will acquire control of the Target.

(9) Marcegaglia submitted an offer for the acquisition of the Target on 25 April 2024. However, given that the Transaction is a notifiable concentration pursuant to Articles 1(3) and 3(1)(b) of the Merger Regulation, it is subject to the prior notification and standstill obligations of Articles 4(1) and 7(1) of the Merger Regulation and, therefore, is conditional upon merger control clearance by the European Commission. As such, in order for the offer to be declared admissible by the Judicial Court of Strasbourg at the Endorsement Hearing, a derogation from the stand-still obligation is required. In the alternative, if Marcegaglia is not granted such a derogation, it will be excluded from the bidding process.

(10) Marcegaglia argues that the suspension obligation and the legal impediment to acquire the Target would cause serious harm to the Target and a loss of a significant business opportunity for Marcegaglia. Pursuant to Article L.642-5 of the French Commercial Code, the Judicial Court of Strasbourg is to select the bidder which, under the best conditions, ensures the most lasting employment attached to the business to be sold, the payment of creditors and offers the best guarantees in terms of implementation. Marcegaglia notes that if no suitable acquirer is identified in the course of the reorganization proceedings, the procedure would be converted into a judicial liquidation procedure which would lead to the liquidation of the Target’s assets and the cessation of its activities. Such a result could not only cause a serious harm to the Target but also to its creditors and employees. According to Marcegaglia, its offer is the best reorganization solution for the Target in terms of long-term stability and viability. Finally, Marcegaglia notes that the lack of derogation from suspension obligation clearly puts it at a disadvantage compared to the other potential bidders for the Target, especially those that might not require prior merger control clearance to acquire the Target. Marcegaglia suggests that only one competing bid would give rise to merger control and foreign direct investment filing requirements.

4. THE CONDITIONS FOR DEROGATION PURSUANT TO ARTICLE 7(3) OF THE MERGER REGULATION

(11) Pursuant to Article 7(1) of the Merger Regulation, a concentration falling under that Regulation shall not be implemented either before its notification or until it has been declared compatible with the common market. Pursuant to Article 7(3) of the Merger Regulation, the Commission may, on the basis of a reasoned request, grant a derogation from the obligation imposed by Article 7(1).

(12) Derogation from the obligation to suspend concentrations is granted only exceptionally, normally in circumstances where the suspension required under the Merger Regulation would cause serious damage to the undertakings concerned by a concentration, or to a third party.

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(13) In deciding upon the request, the Commission must take into account, inter alia, the effects of the suspension on one or more undertakings concerned by the concentration or on a third party and the threat to competition posed by the concentration.

(14) According to Article 7(3) of the Merger Regulation, such a derogation may be made subject to conditions and obligations in order to ensure conditions of effective competition.

4.1. The Transaction falls under the suspension obligation pursuant to article 7(1) of the Merger Regulation

(15) Given that the Transaction appears to qualify as a concentration with EU dimension within the meaning of the Merger Regulation, it falls under the suspension obligation laid down in Article 7(1) of the Merger Regulation.

4.2. The effects of the suspension on the undertakings concerned and third parties

(16) According to the information provided by Marcegaglia, the Target suffers from financial difficulties. This situation of financial distress of the Target is confirmed, in particular, by the Target’s audited accounts for 2022, the Target’s declaration of cessation of payments, and the fact that the Target is subject to reorganization proceedings which entail that the Target is not able to meet its current liabilities with its available assets.

(17) As explained in paragraph (8) above, the relevant provisions of the French Commercial Code and the specifications for the submission of offers issued by the Judicial Court of Strasbourg require that offers for the acquisition of the Target submitted in the course of the reorganization proceedings are unconditional at the latest at the Endorsement Hearing of 30 May 2024 or otherwise would be declared inadmissible. This means that such offers cannot be subject to, among others, merger control clearances, including under the Merger Regulation.

(18) Considering that it would not be possible in the present case to complete the merger control proceedings by 30 May 2024, the fact that the Transaction is subject to the suspension obligation pursuant to Article 7(1) of the Merger Regulation implies that Marcegaglia would not be in a position to participate in the bidding process as it would not be able to make an unconditional offer for the Target at the Endorsement Hearing. This implies that Marcegaglia is placed at a disadvantage vis-à-vis other bidders for the Target and, hence, could suffer serious harm in the absence of derogation. Only granting a derogation would thus create a level-playing field among the different bidders.

(19) According to Marcegaglia, while Marcegaglia is not the only bidder for the Target, the offers made by other bidders are not sufficiently credible or robust and, therefore, it is likely that the Target would be liquidated should Marcegaglia not be able to submit an unconditional offer at the Endorsement Hearing. Namely, there are in total five bidders offering to acquire control over the Target’s assets, including Marcegaglia. Two of them are industrial bidders that have so far not

6The Target’s declaration of cessation of payments stipulates that it has been impossible for the Target to meet current liabilities using available assets on 26 March 2024. This declaration attaches, among others, the Target’s audited accounts for 2022 as proof of the Target’s difficult financial situation leading up to the Target’s declaration of cessation of payments.

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submitted formal offers meeting all legal requirements in order to be acceptable by the Judicial Court of Strasbourg (such as, including description of the assets to be taken over, the price offered, the financing measures, etc.). Another bidder is a financial institution which, according to Marcegaglia, has not submitted a sufficiently robust offer as it does not specify how it would render the Target’s business profitable and does not appear financially secure in terms of necessary investments for the acquisition of the Target. Moreover, Marcegaglia submits that this financial bidder has a history of unsuccessfully operating businesses in the steel industry. Finally, the employees of the Target have also submitted a bid to acquire the Target which appears to rely on financing from the French government and, to Marcegaglia’s knowledge, is still incomplete. In contrast, Marcegaglia submits that its offer is solid and viable and that it is the best placed bidder to ensure the continuation of the Target’s business. Marcegaglia’s plan is to invest around EUR […] million to make the Target’s business more efficient by […]. Marcegaglia would also take on most of the Target’s employees. Marcegaglia further submits that, to date, no other bidder has offered such a substantial investment to transform the Target’s business or to retain most of the Target’s employees.

(20) The existence of other offers however does not guarantee that an acquirer for the Target will indeed be selected by the Judicial Court of Strasbourg and that a liquidation procedure is not opened. Pursuant to Article L. 631-15 of the French Commercial Code, the opening of the liquidation proceedings would result in the automatic and total termination of the Target’s business activities (including all existing contracts) and the lay-off of all employees. Moreover, the opening of the liquidation proceedings would result in the sale of isolated assets of the Target likely leading to achieving a lower sale price to satisfy the claims of creditors. Moreover, in the absence of an acceptable offer, the contractual relationships with suppliers would be terminated and the Target’s customers would cease to receive their deliveries from the Target. Therefore, a decision not to grant the Derogation Request may potentially also have seriously harmful effects on the Target, its creditors, and employees.

(21) Against this background, it is possible to conclude that the suspension obligation imposed by Article 7(1) could lead to serious harm to Marcegaglia and potentially also to the Target, its creditors, and employees. Furthermore, on the basis of the information submitted by Marcegaglia, a derogation from the stand-still obligation would not have adverse effects on any third party. To the contrary, it would enable the Target to continue its operations, to the benefit of creditors, employees, suppliers and customers.

4.3. The threat to competition posed by the concentration

(22) The Parties to the Transaction are active at various but different areas of the steel processing chain. Marcegaglia is active in the global supply of finished carbon steel products of various kinds, as well as several types of semi-finished and finished stainless steel products. The Target, on the contrary, is active globally in the supply of long specialty engineering steel products and, in particular, ingots and billets, wire rod, hot rolled and forged bars and drawn wire.

4.3.1. Relevant markets

(23) In past decisions, the Commission has distinguished broad categories of steel products based, on the one hand, on the chemical composition of the steel

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(metallurgical characteristics) and, on the other hand, on the physical shape of the products. Based on their chemical composition, the Commission has distinguished four broad categories of steel products: (i) carbon steel, (ii) stainless steel, (iii) specialty steel and (iv) electrical steel (which the Parties do not manufacture). Based on their physical shape, the Commission has distinguished between (i) flat and (ii) long products.

(24) The Commission considered that specialty steel can be further segmented into (i) engineering steel, (ii) high speed steel, and (iii) tool steel.

(25) As regards finished flat carbon steel products, the Commission has in the past considered the following separate product markets: (i) quarto plates, (ii) hot-rolled products excluding quarto plates, (iii) cold-rolled steel, (iv) galvanised steel, (v) metallic coated steel for packaging; and (vi) organic coated steel. As regards long carbon steel products, the Commission has in the past considered further subdivisions into sections and steel beams, permanent way material, merchant bars and wide rods.

(26) Within flat stainless steel products, the Commission has further distinguished between: (i) hot rolled and (ii) cold rolled steels. As regards hot-rolled products, a potential segmentation between hot black band and hot white band steels was left open.

(27) In respect of long stainless steel products, the Commission has left open whether to further distinguish between: (i) ingots and billets, (ii) wire rod, (iii) hot rolled and forged bars, (iv) bright bars and (v) drawn wire. Moreover, the Commission has defined a separate market for stainless steel quarto plates and has defined a separate market for stainless steel precision strip.

(28) With respect to the geographic scope of the relevant markets, the Commission has in previous cases found the relevant markets for supply of various steel products to be EEA-wide in scope.

(29) Marcegaglia does not dispute the market definition outlined in the Commission’s decisional practice.

4.3.2. Preliminary assessment

(30) On the basis of the information submitted by Marcegaglia, the Transaction does not give rise to actual or potential horizontal overlaps or vertical relationships in the EEA. As explained in paragraph (22) above, Marcegaglia is active in the processing of carbon and stainless steel products whilst the Target is active in the production of specialty steel products in the EEA. Hence, the Transaction would not give rise to horizontal overlaps.

(31) The Transaction would not give rise to vertical links either. Marcegaglia cannot use the Target’s steel products because it is not active in the processing of specialty or engineering steel of the kind produced by the Target. Similarly, carbon and stainless steel products of the kind produced by Marcegaglia cannot be used for the production of speciality or engineering steel products such as those currently produced by the Target.

(32) For completeness, should Marcegaglia’s offer for the Target be accepted and selected, Marcegaglia plans to […].

(33) As a result, the information submitted by Marcegaglia indicates that the Transaction would currently not give rise to actual or potential horizontal overlaps or vertical relationships between the Parties’ activities in the EEA. As explained in paragraph (32), any potential vertical links between the Parties that could arise post-Transaction […] would likely not give rise to competition concerns.

4.3.3. Conclusion

(34) Therefore, on the basis of the information provided by Marcegaglia, it appears prima facie that the Transaction is not likely to pose a threat to competition within the EEA.

4.4. Balance of interests

(35) Based on the above, on balance, it appears that whilst the suspension obligation could put Marcegaglia at a disadvantage vis-à-vis other bidders for the Target and might, as a result, also affect the Target, its creditors and employees if no better offer is submitted to the Judicial Court of Strasbourg, no threat to competition caused by the Transaction can currently be identified, and a derogation does not appear to have adverse effects on one or more of the Parties or on any third party. Therefore, the Commission finds that a derogation can be granted in accordance with the application and to the extent specified below.

5. TERMS AND CONDITIONS

(36) According to Article 7(3), subparagraph, of the Merger Regulation, a derogation from the suspension obligation laid down by Article 7(1) thereof may be made subject to conditions and obligations in order to ensure effective competition.

(37) On 17 May 2024, Marcegaglia committed to: (i) adopt only those support measures necessary to maintain the Target’s stability and / or viability; (ii) that these support measures will not lead to the operational integration of the Target with Marcegaglia before the Commission has taken the final decision on the Transaction; and (iii) to submit a complete notification to the Commission within 6 weeks from the date of the adoption of the Article 7(3) decision.

(38) Based on the preceding considerations, the Commission has decided to grant a derogation from the suspension obligation with regard to the Transaction subject to the following conditions:

(a) Until the Commission has adopted its decision on the compatibility of the Transaction, Marcegaglia will take only the actions which are necessary to maintain the Target’s viability and / or stability;

(b) Marcegaglia will ensure that the Target’s business is not operationally integrated with Marcegaglia until the Commission has taken and notified a final decision on the compatibility of the Transaction with the internal market and the EEA agreement; and

(c) Marcegaglia will submit a complete notification of the Transaction to the Commission without delay, and in any event no later than 6 weeks from the adoption of the Article 7(3) decision in order to allow the assessment of the compatibility of the Transaction with the internal market and the EEA agreement.

6. CONCLUSION

(39) The Commission considers that the reasons given by the Parties for derogation from the suspension obligations meet the requirements set out in Article 7(3) of the Merger Regulation.

(40) On the basis of the above considerations, and in accordance with Article 7(3) of the Merger Regulation and Article 57 of the EEA Agreement, Marcegaglia is granted a derogation from the obligations imposed by Article 7(1) of the Merger Regulation in accordance with its application and the foregoing terms and conditions until the Commission takes a final decision under the relevant provisions of the Merger Regulation.

For the Commission (Signed) Margrethe VESTAGER Executive Vice-President

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