Commission Decision of 02/07/2012 declaring a concentration to be compatible with the common market (Case No COMP/M.6535 - GLORY / TALARIS TOPCO) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

• Published date: 02 July 2012
• Subject Matter: Competition,Concentrations between undertakings

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Commission Decision of 02/07/2012 declaring a concentration to be compatible with the common market (Case No COMP/M.6535 - GLORY / TALARIS TOPCO) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

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 Where possible the information omitted has been replaced by ranges of figures or a general description.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

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| |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 No 139/2004 [1]

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 purchase of shares. [2] 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 of associated services. [3] Talaris is currently controlled by the private equity firm Carlyle which acquired the business in 2008 when it was spun out of De La Rue. [4]

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 2 500 million (GLORY: EUR 1 223 million; Talaris: EUR 370 million). [5] 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.

IV.1. Product descriptions

IV.1.1. Customer-operated ATMs

(...PICT...)

7. Customer-operated ATMs are self-service units which automate certain cash handling functions traditionally performed by bank tellers. While some ATMs only dispense banknotes ("ATM Dispensers"), the latest ATM models also accept deposits from customers, check, sort, authenticate and store banknotes while other ATM models are also able to recycle cash ("ATM-Rs").

Figure 1 Example of a Talaris ATM-R. Source: Form CO

8. In this context, recycling means the ability to receive a banknote, verify it for fitness and authenticity and return the same note back to the teller or customer. ATM-Rs, Teller-assist Cash Recyclers ("TCRs"), and banknote sorters are cash handling products including a recycling function. According to regulation by the European Central Bank ("ECB"), where a company chooses such automated recycling system in the Eurozone, it must use a product approved by a National Central Bank. [6] Alternatively, the collected cash has to be checked by trained staff or be delivered to specialised cash-in-transit companies using approved cash handling products. Euro coins however do not fall under the ECB Regulation.

9. Equivalent National Bank Certification procedures exist in the Czech Republic and Hungary with only minor differences in the costs and the term of validity of certifications. According to the Parties, in practice customers in the EEA require all automated cash handling products to be of a standard equivalent to those of the ECB.

IV.1.2. Teller-assist ATMs

(...PICT...)

10. Teller-assist ATMs are mechanically similar to customer-operated ATMs, but are installed under the teller’s counter or at other teller locations. Teller-assist ATMs are used by bank staff rather than customers directly. They include Teller Cash Dispensers ("TCDs"), which store cash of various denominations in a secure unit and dispense cash as required, and TCRs, which in addition are capable of recycling banknotes.

Figure 2 Example of a GLORY TCR. Source: Form CO

IV.1.3. Banknote handling products

11. Banknote handling products comprise banknote counters and banknote sorters. Banknote counters are designed to count loose or bundled banknotes. They can range from low-cost basic weighing scales to more sophisticated devices capable of accurately counting large volumes of strapped notes. Banknote sorters are used to sort or differentiate denominations of cash and to recycle banknotes, i.e. to check them for fitness and authenticity.

(...PICT...)

Figure 3 Example of a GLORY banknote sorter. Source: Form CO

IV.1.4. Coin handling products

12. Coin handling products perform many of the same functions for coins as banknote handling products do for banknotes. Coin counters are used to count single denominations of coins at a time and generally cannot sort between different denominations of coins. Coin sorters are capable of counting and sorting mixed amounts of coins of various denominations into separate compartments. In addition, coin sorters authenticate coins filtering out counterfeits or other currency coins. Coin wrappers count coins and enclose them in paper tubes, with each tube consisting of a specific number of coins allowing for easy transportation. [7] Coin deposit units are self-service units that allow customers to deposit large amounts of coins securely. The coins are sorted and counterfeits detected, while foreign objects are filtered out.

(...PICT...)

Figure 4 Example of a Talaris coin sorter. Source: Form CO

IV.2. Product market definitions

IV.2.1. Overall market for automated cash handling products

13. The Parties submit that the relevant product market is the supply of all types of automated cash handling products predominantly to the financial sector excluding sales of ATMs to retail and cash-in-transit companies. This market would include the supply of customer-operated ATMs, teller-assist ATMs, banknote handling products as well as the various types of coin handling product described in section IV.1.4 above.

14. The Parties argue that these products are functionally similar and largely substitutable. According to GLORY, they all serve to improve the efficiency of a financial institution’s retail branch network by reducing staff numbers required and reducing teller time spent on cash handling. Moreover, GLORY submits that all of the products improve security by reducing the amount of time that cash is in open circulation within the branch. Furthermore, GLORY argues that customer-operated ATM-Rs, TCRs and banknote sorters with recycling functions are each capable of complying with the ECB cash recycling regulations described in recital 8 above.

(...)

15. The Commission has in the past identified two distinct markets for (i) financial workstations comprising ATMs and cash dispensing machines used by the financial sector and (ii) retail workstations comprising cash registers and electronic credit or debit systems such as point-of-sale or electronic cash registers used in the retail, hotel and restaurant businesses. [8] However, these precedents do not mention smaller cash handling products such as banknote and coin handling products specifically. In a more recent decision, the Commission left open the precise product market definition for financial and retail workstations. [9]

16. The Commission considers, on the basis of the market investigation...