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Case No COMP/M.6535 - GLORY/ TALARIS TOPCO

Only the English text is available and authentic.

REGULATION (EC) No 139/2004 MERGER PROCEDURE

Article 6(1)(b) NON-OPPOSITION Date: 02/07/2012

In electronic form on the EUR-Lex website under document number 32012M6535

Office for Publications of the European Union L-2985 Luxembourg

EUROPEAN COMMISSION

Brussels, 2.7.2012 C(2012) 4678 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 Where possible the information omitted has been replaced by ranges of figures or a general description.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.6535 – GLORY/ TALARIS TOPCO Commission decision pursuant to Article 6(1)(b) of Council Regulation 1No 139/2004

1.On 30 May 2012, the European Commission received notification of a proposed concentration pursuant to Article 4 and following a referral pursuant to Article 4(5) of the Merger Regulation by which the undertaking GLORY Ltd. ("GLORY", Japan) acquires within the meaning of Article 3(1)(b) of the Merger Regulation control of the whole of the undertaking Talaris Topco Ltd. ("Talaris", United Kingdom) by way of 2 purchase of shares.GLORY and Talaris are designated hereinafter as "the Parties".

I. THE PARTIES

2.GLORY is a Japanese company active in the development and manufacture of money handling machines, cash management systems, vending machines and coin operated lockers for customers in the financial, retail and leisure sectors.

3.UK-based company Talaris is active in the development and manufacture of cash management products mainly for customers in the financial sector and the provision

3 of associated services.Talaris is currently controlled by the private equity firm 4Carlyle which acquired the business in 2008 when it was spun out of De La Rue.

II. THE OPERATION

4.On 14 February 2012, GLORY announced that it had made a binding offer to acquire all of the voting securities in Talaris. Following the receipt of relevant consents from the employee works council in France, the Parties signed a Sales and Purchase Agreement to this effect on 23 February 2012. GLORY will therefore acquire sole control over Talaris and the notified operation constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

III. EU DIMENSION

5.The concentration does not meet the jurisdictional thresholds of Article 1 of the Merger Regulation as the Parties' combined worldwide turnover is less than EUR 5 2 500 million (GLORY: EUR 1 223 million; Talaris: EUR 370 million).However, on 26 March 2012, GLORY submitted a reasoned submission under Article 4(5) of the Merger Regulation that the transaction should be examined by the Commission because it was capable of being reviewed under the national competition laws of three Member States, namely Germany, Spain and Portugal. As none of the Member States competent to review the proposed transaction objected within 15 working days of having received the reasoned submission, the concentration is deemed to have a Union dimension.

IV. MARKET DEFINITION

6.The Parties' principle activity is the manufacture and supply of automated cash handling products. These comprise customer-operated ATMs, teller-assist ATMs, banknote handling products and coin handling products, each of which is described in more detail in the following section.

3 Talaris derives approximately [40-60%] of its EEA revenues from sales of cash handling products and [40- 60%] from servicing of its installed base in the eight EEA Member States where it has a direct sales presence (Belgium, France, Germany, Luxembourg, the Netherlands, Portugal, Spain and the United Kingdom). In contrast, GLORY only services automated cash handling products in Belgium, France, Germany and Italy and achieved a […] service turnover of EUR […], equivalent to […]% of its EEA- wide turnover, in 2011. Moreover, Talaris' service turnover related almost exclusively to its own installed base while GLORY only offers services for its own installed base and does not offer maintenance services for third party products. Accordingly, the Parties did not compete for after-sales services and maintenance prior to the notified operation. Consequently, and in light of the fact that market participants have not raised substantiated concerns with respect to after-sales servicing and maintenance, these services are not considered further in this Decision.

4 Case No COMP/M.5248 Carlyle/De La Rue Cash Systems Business, 28.7.2008.

5 Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission Consolidated Jurisdictional Notice (OJ C 95, 16.4.2008, p. 1).

2

41.CTS Cashpro is the world's largest manufacturer of TCRs with activities in 18 EEA Member States.CIMA is an Italian company focussing on the sale of TCRs. The company entered into an exclusive licensing agreement with NCR in 2007 according to which NCR manufactures CIMA TCRs and sells them under the NCR brand. NCR is one of the world's leading suppliers of automated cash handling products and the largest supplier of customer-operated ATMs worldwide and in the EEA. Wincor Nixdorf is a leading provider of IT solutions and services to retailers and retail banking. The company is the second largest providers of ATMs worldwide and in the EEA.

42.Accordingly, the Parties' competitors are strong players both in terms of financial power and innovation. This is also evidenced by their ability to grow their market shares. Wincor Nixdorf and CIMA have been successful in strengthening their market position by winning tenders over the past three years, gaining [5-10]% and [5-10]% of market share respectively since 2009.

43.The Commission considers that the results of the market investigation do not seem to confirm the Parties' claim that new players – either already active in banknote handling systems or in customer-operated ATMs – could readily enter the TCR segment. In particular, competitors contacted in the market investigation pointed out that market entry required investments in developing TCR storage modules that differ from ATM or banknote handling modules in size and technology.

44.Nevertheless, Cespro, a competitor primarily active in the manufacturing of semi-automated safes, has recently entered the TCR segment, indicating that market entry is attractive and feasible. This is supported by the fact that the European TCR market is forecast to grow considerably over the next years. The RBR reports that [discussion of growth in the TCR market] […]. […].

45.Consequently, a number of market players contacted in the market investigation expect TCR imports into the EEA by Asian manufacturers to grow in the future.A TCR competitor specifically explained that Asian TCR manufacturers are currently looking into investments in the European market and are expected to enter the market over the next five years.

46.Overall, end customers contacted in the market investigation have not raised substantiated concerns with respect to the TCR segment. In contrast, a number of TCR customers anticipate that the proposed transaction will have beneficial effects on their business. This relates, in particular, to the enhanced power of the merged entity to innovate, to offer an extended product range and to meet customers' service requirements through an extended service network.

47.Demand for TCRs in the EEA is concentrated in a relatively small number of financial institutions.After testing TCRs of different suppliers in a pilot phase, financial institutions regularly launch tenderssetting out the volume required, the specification of the units, the warranty requirements and the length of any after-sales servicing and maintenance. On the basis of the market investigation, the Commission notices that customers consider quality, reliability and price of the products as more important factors in their purchasing decision than the existing customer relationships of a supplier.Moreover, based on the results of the market investigation, it also notices that a large part of customers multi-source their TCR purchases.

48.Due to the economic strength of financial customers and the use of tender processes, the vast majority of TCR end customers contacted in the market investigation indicated they were not dependent on the Parties for the supply of TCRs. The market investigation also confirmed that the vast majority of end customers do not expect the Parties' negotiation power to increase in relation to them following the transaction.

49.Therefore, there are a number of important competitors which will remain active in bidding for tenders in the market and continue to exert a competitive constraint on the merged entity. Market entry by European and Asian manufacturers in the growing TCR segment remains attractive and feasible. There is significant buyer power of the merged entity's customers who are sophisticated, financial institutions and which have not raised any substantiated concerns relating to the proposed transaction. The Commission thus concludes that the transaction does not raise serious doubts as to its compatibility with the internal market even if the TCR segment were considered to constitute a separate product market.

V.2.Banknote handling products

50.The proposed transaction also gives rise to affected markets with respect to banknote handling products, notably banknote counters and banknote sorters.

V.2.1.Banknote counters

51.If the product market is further sub-segmented, the Parties' combined market share for banknote counters is [20-30]% in the EEA (GLORY: [10-20]%; Talaris: [5-10]%) and [20-30]% in the EU (GLORY: [10-20]%; Talaris: [5-10]%). Competitors at the EEA levelinclude VIP Buic ([10-20]%), Magner ([5-10]%) and Scan Coin ([5-10]%). In addition, there are a large number of smaller players, including Asian importers, accounting for approximately [30-40]% of the market.

52.The Parties' market shares in banknote counters have declined since 2009, falling from [30-40]% in 2009 to [20-30]% in 2011, due to […]. In terms of units sold Talaris' sales have […] since 2009.

53.Banknote counters are generally low-cost pieces of hardware. Due to this fact, together with the relatively easy access to distribution networks as explained in recital 33 above, the market investigation has not identified significant barriers to market entry in the banknote counter segment.

54.Furthermore, market participants have not raised substantiated concerns in the market investigation. In contrast, some end customers highlight the large number of available suppliers in the EEA market. Moreover, some customers expect beneficial effects from the proposed transaction, in particular relating to research and development investments. In particular, some end users submit that the newly created entity will be able offer better banknote handling products and services.

V.2.2.Banknote sorters

55.As regards banknote sorters, the Parties have a combined market share of [20-30]% in the EEA and in the EU (GLORY: [10-20]%; Talaris: [5-10]%). Competitors at the EEA levelinclude Kisan ([30-40]%), Giesecke & Devrient ([10-20]%) and Laurel ([5-10]%).

There is an additional number of smaller players, including Asian importers, accounting for approximately [10-20]% of the market.

56.Talaris' market share in banknote sorters has only recently exceeded [5-10]% in the EEA. Until 2010, Talaris' market share was less than [0-5]% ([0-5]% in 2010 and [0-5]% in 2011).

57.Market players contacted in the market investigation have not raised substantiated concerns with respect to banknote sorters. However, some end customers specifically mentioned that the merged entity will be able to provide customers with more competitive solutions. Moreover, some end users consider that the proposed transaction might lead to price decreases in the banknote sorting segment.

58.In sum, the combined market share of the Parties in the two potential banknote handling sub-markets are below or only slightly above 25%, the threshold identified by the Commission to indicate that a concentration is not liable to impede effective competition.There are a number of strong competitors able to supply both types of products in the EEA and market players have not raised substantiated concerns. Accordingly, even under a narrow product market definition differentiating between the different types of banknote handling products, the transaction does not raise serious doubts as to its compatibility with the internal market.

V.3.Coin handling products

59.With respect to coin handling products, the transaction does not give rise to an affected market as the Parties' combined market share is [10-20]% in the EEA (GLORY: [5-10]%; Talaris: [0-5]%) and [10-20]% in the EU (GLORY: [10-20]%; Talaris: [0-5]%). Talaris' business activities in the coin handling segment are […] with sales of [...] EUR […] in the EEA in 2011. The Parties' competitors at the EEA level are Scan Coin ([30-40]%), Laurel ([10-20]%), Pro Coin ([5-10]%), CT Coin ([0-5]%) and a number of other smaller players ([20-30]% combined) including Asian importers.

60.Even if the market were further sub-segmented into the markets for coin counters, coin sorters, coin wrappers and coin deposit units the assessment would not change materially. The Parties' market shares in the EEAare set out in Table 3 below:

Coin counters

Coin sorters

Coin deposit systems

[10-20]%

[10-20]%

[0-5]%

[0-5]%

[5-10]%

[0-5]%

Combined

[10-20]%

[10-20]%

[0-5]%

Table 3 Market shares in coin handling product sub-segments. Source: Parties' estimates in response to the Commission's Request for Information of 19 June 2012.

61.In the affected market for coin counters, the increment at the EEA level due to the acquisition of Talaris is limited at [0-5]%, equivalent to a Talaris turnover of EUR […] in 2011. The merged entity will continue to face competition from Scan Coin ([30-40]%), Pro coin ([20-30]%), CT Coin ([5-10]%) and a number of smaller competitors (together [20-30]%).

62.In the market for coin sorters at the EEA level, the merged entity will become the number three supplier behind Scan Coin ([30-40]%) and Pro coin ([20-30]%). Other competitors include CT Coin ([5-10]%) and Laurel ([5-10]%) with a number of smaller competitors together accounting for a market share of [10-20]%.

63.In light of the above, and in the absence of any concerns on the part of the Parties' customers and competitors contacted in the market investigation, it is concluded that the proposed transaction does not raise serious doubts as to its compatibility with the internal market with regards to coin handling products.

VI.CONCLUSION

64.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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