EUROPEAN COMMISSION DG Competition

Only the English text is available and authentic.

REGULATION (EC) No 139/2004 MERGER PROCEDURE

Article 4(4) Date: 22.05.2019

EUROPEAN COMMISSION

Brussels, 22.05.2019 C(2019) 4015 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 Where possible the information omitted has been replaced by ranges of figures or a general description.

To the notifying parties

To the Dutch Competition Authority

Subject: Case M.9342 – Onex/Waterland/KidsFoundation/Partou Commission decision following a reasoned submission pursuant to 1 Article 4(4) of Regulation No 139/2004 for referral of the case to the Netherlands and Article 57 of the Agreement on the European Economic 2 Area.

Date of filing: 17.04.2019 Legal deadline for response of Member States: 15.05.2019 Legal deadline for the Commission decision under Article 4(4): 29.05.2019

Dear Sir or Madam,

1. INTRODUCTION

(1) On 17 April 2019, the Commission received by means of a Reasoned Submission a referral request pursuant to Article 4(4) of the Council Regulation (EC) No 139/2004 (the “Merger Regulation”) with respect to the proposed acquisition by Onex Corporation (“Onex”, Canada) and Waterland Private Equity Investments B.V.

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, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË

Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.

(“Waterland”, the Netherlands) of joint control over KidsFoundation Holdings B.V. (“KFH”, the Netherlands) and Partou Holding B.V. (“Partou”, the Netherlands), by way of purchase of shares (the “Transaction”). Onex and Waterland are hereafter referred to as the “Parties”. The Parties request the operation to be examined in its entirety by the competent authorities of the Netherlands.

(2) According to Article 4(4) of the Merger Regulation, before a formal notification has been made to the Commission, the parties to the transaction may request that their transaction be referred in whole or in part from the Commission to the Member State where the concentration may significantly affect competition and which present all the characteristics of a distinct market.

(3) A copy of this Reasoned Submission was transmitted to all Member States on 17 April 2019.

(4) By e-mail of 25 April 2019, the Autoriteit Consument & Markt as the competent authority of the Netherlands informed the Commission that the Netherlands agree with the proposed referral.

2. THE PARTIES

(5) Onex Corporation (“Onex”) is a Canadian-based corporation listed on the Toronto Stock Exchange that invests in companies in various industries. In addition, Onex has investments in real estate, credit strategies and middle-market private equity opportunities.

(6) Waterland Private Equity Investments B.V. (“Waterland”) is an independent private equity investment group based in the Netherlands which focuses on four investment themes: Ageing Population, Outsourcing & Efficiency, Leisure & Luxury, and Sustainability. The current portfolio of Waterland covers circa 40 businesses active in a wide range of industries and countries.

(7) KidsFoundation Holdings B.V. (“KFH”) is a Dutch childcare business focusing on child day-care and out-of-school care with the brand names Smallsteps, Zus en Zo, KITS, SKS Alles Kids, de Speelbrug, Kindercentrum.nl and Belle Fleur. As per December 2018, KFH has 379 childcare facilities, offering child day-care in 250 facilities and (also) out-of-school care in 294 facilities, across the Netherlands. Onex acquired control over KFH in November 2018 and KFH is Onex’ sole investment in respect of childcare services.

(8) Partou Holding B.V. (“Partou”) is a Dutch childcare business focusing on childcare, comprising of 287 facilities, out of which child day-care is offered in 192 day-care facilities and (also) out-of-school care in 196 facilities, in the Netherlands.

3. THE OPERATION AND THE CONCENTRATION

(9) The proposed transaction involves the acquisition of joint control by Onex and Waterland over KFH and Partou (the “Transaction”).

(10) Concretely, Onex - which currently solely controls KFH – will, through KFH, acquire control over Partou. At the same time, Waterland will indirectly acquire joint control, together with Onex, over TopCo, a holding company that holds all the shares of KFH.

(11) The concentration will be implemented by two simultaneous interrelated share purchase transactions. The first one will consist of the purchase by KFH of the entire share capital of Partou from Navitas B.V., Kalamaris B.V. and Kalamaris II B.V. The second one will consist in the subscription by Waterland of shares in TopCo.

(12) The Commission concludes that both transactions are interrelated within the 3 meaning of paragraphs 38, 43 and 46 of the Commission Jurisdictional Notice. Indeed, the subscription of shares by Waterland in TopCo is conditional upon the completion of the acquisition by KFH of the shares in Partou. Similarly to the situation of a serial acquisition described in paragraph 46 CJN, Waterland will only acquire control over KFH conditional upon KFH acquiring control over Partou. Both transaction agreements (Subscription Agreement and Signing Protocol) were signed simultaneously, and both transactions will be effectively completed simultaneously. In addition, the subscription by Waterland will provide (part of) the equity financing related to the share acquisition by KFH of Partou. The latter transaction is thus economically dependent on the equity financing provided by the former transaction.

(13) Both Waterland and Onex have […] and […]. They also both enjoy […]. These rights thus enable Waterland and Onex to exert decisive influence over TopCo and, indirectly, KFH, a full-function company operating autonomously on the childcare market.

(14) In light of the above, the Transaction thus gives rise to the acquisition by Onex and Waterland of indirect joint control over Partou and KFH within the meaning of Article 3(1)(b) and 3(4) of the EU Merger Regulation.

4. EU DIMENSION

(15) The undertakings concerned have a combined aggregate worldwide turnover of more 4 than EUR 5 000 million(Onex: EUR 21 403 million; Waterland: […]; Partou: […]). Each of Onex and Waterland has an EU-wide turnover in excess of EUR 250 million (Onex: […]; Waterland: […]) but not each of the undertakings concerned achieves more than two-thirds of their aggregate EU-wide turnover within one and the same Member State. The notified operation therefore has an EU dimension within Article 1(2) of the Merger Regulation.

5. ASSESSMENT

(16) Both KFH and Partou are active in relation to childcare service. They do not have other activities in any market which is downstream or upstream from the relevant activities. Therefore, the Transaction would not give rise to any vertical relationships.

3 Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings, 2008/C 95/01 (“CJN”).

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

(17) The Commission has previously considered the market for the provision of childcare services in case COMP/M.7256 – KKR/HIG/Estro, in which case it left open the exact product and geographic market definitions.

5.1. Relevant product markets

Child day care versus out-of-school care

(18) According to the Parties, the Transaction concerns the market for childcare services, which can be sub-segmented into the market for child day-care (0-4 years) and the market for out-of-school care (4-12 years).

Child day-care (0-4 years)

(19) On the basis of the information submitted in the Reasoned Submission, child day-care comprises day-care for all children of 0-4 years old. This day-care is usually provided for half a day or a full day, generally up to five days per week. Parents will determine the required number of days of professional day-care on the basis of their own (work) commitments and alternative day-care solutions they may have (such as day-care by relatives). Child day-care is usually provided in dedicated child day-care centres.

(20) Child day-care is also provided by childminders (“gastouders”), which are persons looking after children, typically in their own home, but may also provide the day-care in the home of the child. The Parties submit that, from a demand side perspective, day-care by childminders is largely substitutable with day-care in child day-care centres because the same type of service is offered.

(21) However, only when childminders meet the applicable standards and requirements can they be registered in the National Childcare Register (“NCR”). This registration is important, because without such registration, parents are not able to request the tax refund to cover part of the costs.

(22) Apart from registered child day-care, there are also informal forms of child day-care, which may, for example, be provided by unregistered childminders or au pairs that, according to the Parties, provide a realistic alternative for parents and hence exert competitive pressure on providers of registered child day-care services.

Out-of-school care (4-12 years)

(23) According to the information provided by the Parties in the Reasoned Submission, out-of-school care entails care for children aged from 4 up to and including the age of 12 for the hours of the day that they are not in school. This includes before- and after-school care. Similarly to child day-care for children in the age up to 4 years old, out-of-school care is typically offered in dedicated out-of-school care centres, but may also be provided in specific areas of schools or at sport clubs. In addition, childminders also offer out-of-school services.

(24) Moreover, similarly to child day-care, informal care comprises a significant share of the total market for out-of-school care.

5.2. Relevant geographic markets

Child day-care (0-4 years)

(25) According to the Parties, the relevant geographic market for child day-care is limited in scope, given that parents will require a relatively short travel time and distance between their homes or their place of work and the location where child day-care is provided. The Parties believe that the market for child day-care is local in scope. The Parties believe that the relevant geographic market may be defined at municipality level.

(26) However, the Parties also provided market shares on the basis of catchment areas surrounding particular facilities. Referring to a study into childcare services in the 5 Netherlands from 2009 (the "2009 Childcare Study"), the Parties submit that these catchment areas consist of travel times of 10.8 minutes by bike, 12.15 minutes by car or 8.05 minutes by foot, as the average times parents are prepared to travel in order to reach a child day-care location.

Out-of-school care (4-12 years)

(27) Similarly to the market for child day-care, the Parties submitted that the market for out-of-school care should be considered limited in scope. The parties believe that the relevant geographic market may be defined at municipality level.

(28) The Parties provided out-of-school care market shares at municipality level as well as on the basis of catchment areas. Referring to the 2009 Childcare Study, these catchment areas would consist of travel times of 9.87 minutes by bike, 11.89 minutes by car or 8.4 minutes by foot as the average travel times parents are prepared to travel in order to reach an out-of-school care location.

5.3. Assessment of the referral request

Legal requirements

(29) According to the Commission Notice on case referral, in order for a referral to be made by the Commission to one or more Member States pursuant to Article 4(4), the following two legal requirements must be fulfilled:

(i) there must be indications that the concentration may significantly affect competition in a market or markets,and

(ii) the market(s) in question must be within a Member State and present all the characteristics of a distinct market.

(30) On the basis of the information submitted in the Reasoned Submission, KFH operates child day-care centres in 72 municipalities in the Netherlands. Partou has child daycare centres in 49 municipalities in the Netherlands, and the child day-care activities of KFH and Partou overlap in 15 Dutch municipalities (Almere, Alphen aan den Rijn, Amsterdam, Arnhem, Bloemendaal, Breda, Deventer, Haarlem, Haarlemmermeer, Hoogeveen, Kampen, Leidschendam-Voorburg, Rotterdam, Utrecht and Zwolle), 112 catchment areas by bike and 156 catchment areas by car in the Netherlands.

(31) In addition, on the basis of the information submitted in the Reasoned Submission, KFH operates out-of-school care centres in 76 municipalities in the Netherlands. Partou has out-of-school care centres in 49 municipalities in the Netherlands, and the out-of-school care activities of KFH and Partou overlap in 16 municipalities (Almere, Alphen aan den Rijn, Amsterdam, Arnhem, Breda, Deventer, Haarlem, Haarlemmermeer, Hoogeveen, Kampen, Leidschendam-Voorburg, Rijswijk, Rotterdam, ‘s-Gravenhage, Utrecht and Zwolle), 84 catchment areas by bike and 117 catchment areas by car.

(32) The Transaction leads to a number of affected markets for the provision of child day-care services. In particular, when assessing KFH’s and Partou’s child day-care activities at municipality level, the Transaction gives rise to one affected market in Leidschendam-Voorburg. Instead, when assessing KFH’s and Partou’s child day-care activities at catchment area level, the Transaction gives rise to 50 affected catchment areas by bike and to 37 affected catchment areas by car.

(33) The Transaction also leads to a number of affected markets for the provision of out-of-school care services. In particular, when assessing KFH’s and Partou’s out-of-school care activities at municipality level, the Transaction gives rise to one affected market in Amsterdam (including Diemen). When assessing KFH’s and Partou’s out-of-school care activities at catchment area level, the Transaction gives rise to 43 affected catchment areas by bike and to 43 affected catchment areas by car.

(34) In view of the foregoing, the preliminary assessment suggests that (i) the Transaction may significantly affect competition within a Member State and (ii) the effects of the Transaction would be limited to the Netherlands. In addition, the markets in question all have the characteristics of distinct markets. Therefore, the legal requirements set forth by Article 4(4) of the Merger Regulation appear to be met.

5.3.1. Additional factors

(35) In addition to the verification of the legal requirements, point 19 of the Notice provides that it should also be considered whether referral of the case is appropriate, and in particular “whether the competition authority or authorities to which they are contemplating requesting the referral of the case is the most appropriate authority for dealing with the case”.

(36) In addition, point 23 of the Notice states that “Consideration should also, to the extent possible, be given to whether the NCA(s) to which referral of the case is contemplated may possess specific expertise concerning local markets, or be examining, or about to examine, another transaction in the sector concerned”.

(37) Given the fact that the focus of any competitive effects of the Transaction is confined to the Netherlands, and the ACM has recently assessed the acquisition of sole control by Onex of KFH, the ACM seems well placed for dealing with this Transaction.

6. CONCLUSION ON REFERRAL

(38) On the basis of the information provided by the Parties in the Reasoned Submission and the Commission’s assessment above, the case meets the legal requirements set out in Article 4(4) of the Merger Regulation in that the proposed concentration may significantly affect competition in a market within a Member State which presents all the characteristics of a distinct market. Furthermore, the requested referral would be consistent with paragraphs 19-23 of the Commission Notice on Case Referrals, in particular because the ACM appears to be the most appropriate authority to consider the Transaction.

7. CONCLUSION

(39) For the above reasons, and given that the Netherlands has expressed its agreement, the Commission has decided to refer the transaction in its entirety to be examined by the Netherlands. This decision is adopted in application of Article 4(4) of the Merger Regulation and Article 57 of the EEA Agreement.

For the Commission

(Signed) Johannes LAITENBERGER Director-General

Case ACM/18/033689. The clearance decision can be retrieved from: https://www.acm.nl/sites/default/files/documents/2018-08/besluit_childcare_mag_kidsfoundation_overnemen_1.pdf

8 Catchment areas surrounding a particular Partou or KFH child day-care facility on the basis of a maximum travel time of 10.8 minutes by bike. Assessment made through the use of Google Maps.

9 Catchment areas surrounding a particular Partou or KFH child day-care facility on the basis of a maximum travel time of 12.15 minutes by car. Assessment made through the use of Google Maps.

10 Catchment areas surrounding a particular Partou or KFH child daycare facility on the basis of a maximum travel time of 9.87 minutes by bike. Assessment made through the use of Google Maps.

11 Catchment areas surrounding a particular Partou or KFH child daycare facility on the basis of a maximum travel time of 11.89 minutes by car. Assessment made through the use of Google Maps.

12 As per point 20 of the Commission Notice on Case Referrals.