Commission Decision of 13/05/2013 declaring a concentration to be compatible with the common market (Case No COMP/M.6756 - NORSK HYDRO / ORKLA / JV) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)
| Published date | 13 May 2013 |
| Subject Matter | Concentrations between undertakings,Competition |
Commission Decision of 13/05/2013 declaring a concentration to be compatible with the common market (Case No COMP/M.6756 - NORSK HYDRO / ORKLA / JV) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)
|EUROPEAN COMMISSION |
Brussels, 13.5.2013
C(2013) 2883 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 Where possible the information omitted has been replaced by ranges of figures or a general description.
MERGER PROCEDURE ARTICLE 6(1)(b) DECISION
To the notifying parties |
Dear Sir/Madam,
Subject: Case No COMP/M.6756 - NORSK HYDRO/ ORKLA/ JV Commission decision pursuant to Article 6(1)(b) in conjunction with Article 6(2) of Council Regulation No 139/2004 [1]
1. On 18 March 2013, the European Commission received a notification of a proposed concentration pursuant to Article 4 of the Merger Regulation, by which the undertakings
Norsk Hydro ASA ("Hydro", Norway) and Orkla ASA ("Orkla", Norway) acquire within the meaning of Article 3(4) of the Merger Regulation joint control of a newly created company constituting a joint venture (JV), by way of purchase of shares. [2] Hydro and Orkla are designated hereinafter as the "Parties".
I. THE PARTIES AND THE TRANSACTION
2. Hydro is a global supplier of aluminium with activities throughout the value chain, including the production and sale of primary aluminium, soft-alloy extrusions, building systems and flat-rolled products.
3. Orkla is a Norwegian company with international operations. Its main focus is the branded consumer goods sector. In addition it operates in the aluminium, hydro power and financial investment sector.
4. On 14 October 2012, Hydro and Orkla signed a contribution agreement with a view to establishing the JV operating in the aluminium soft-alloy extrusion sector (“Contribution Agreement”). Included within the businesses to be transferred to the JV are also the Parties’ building systems activities and their precision tubing businesses.
5. The businesses being contributed by Orkla all fall under the ownership of Orkla’s wholly-owned subsidiary, Sapa Holding AB (“Sapa”).
6. Each of Hydro and Orkla will retain outside the JV their respective interests in aluminium flat-rolled products. [3]
I.1. Joint control
7. The JV will be jointly controlled by Orkla and Hydro within the meaning of the Merger Regulation. Orkla will hold 50% of the issued share capital in the JV and Hydro the remaining 50%. Pursuant to the shareholders’ agreement which is attached to the Contribution Agreement, the Parties will have parity of voting at the shareholders’ meeting and each will appoint the same number of directors to the board. No member of the board of directors will have a casting vote.
I.2. Full-functionality
8. The JV will have a management dedicated to its day-to-day operations and sufficient resources to operate independently on the market, including finance, staff and assets. It will also have direct access to customers and suppliers independent of its parents.
9. As for the lasting basis requirement, Article 19 of the shareholders' agreement attached to the Contribution Agreement provides that […]subject to a procedure set out in the Shareholders agreement.
10. The Commission considers that this provision is not sufficient to conclude that the proposed transaction is not constituted on a lasting basis. This is because the Contribution Agreement, while providing for an option to terminate the joint venture, also provides for the possible continuation of the joint venture for an indefinite period.
11. As a result, the Commission concludes that the proposed transaction consists of the creation of a full-functional joint venture which will perform all the functions of an autonomous economic entity on a lasting basis.
II. EU DIMENSION
12. The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million (Hydro: EUR 11 733 million; Orkla: EUR 7 351 million). The two of them have an EU-wide turnover in excess of EUR 250 million (Hydro: EUR […] million; Orkla: EUR […] million), but they do not achieve 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 pursuant to Article 1(2) of the Merger Regulation.
III. COMPETITIVE ASSESSMENT
III.1. Introduction to the aluminium extrusion industry
13. Aluminium extrusions are produced from billets of aluminium alloys. Extrusion aluminium billets are heated in an oven and consequently pushed through a pre-shaped iron die by a large hydraulic press. The traditional analogy is that of squeezing toothpaste from a tube (see Figure 1 below).
Figure 1 – Soft alloy extrusions – production process
(...PICT...)
14. Following the extrusion process some extrusions are cooled and may be milled, drilled, tapped, bent, aged, anodized or painted. Extrusions are finally sawed in transportable lengths and packed.
15. There are two broad categories of alloys used for extrusion: hard-alloys and soft-alloys.
16. In the EEA, the principal aluminium-magnesium alloys used to manufacture soft alloy extrusions are alloy 6063 (and its alternative alloy 6060) and alloy 6082 (and its alternative alloy 6005a).
17. Plants vary as to the size of press in use. The most common press sizes are in the 7-9 inches diameter range, [4] although there are a number of larger presses in the EEA (i.e. 12 inches and above). Presses can produce extrusions that are smaller in diameter than their classification and larger presses are sometimes employed to produce smaller extrusions (although this is often not economically profitable). There are more than 500 soft-alloy presses in the EEA.
18. Dies can be changed quickly and easily, allowing a large number of different shapes to be manufactured using the same machinery (see Figure 2 below). The dies may be manufactured in integrated die-shops, or designed to the customer’s specifications at relatively little cost and in little time by independent die-shops. Most manufacturers keep a large stock of dies. Once a die is available, the time taken in switching a press from one die to another is on average only two minutes.
Figure 2 – Soft alloy extrusions – Shaping the billet through a die
(...PICT...)
19. The process of extrusion is capable of producing a variety of metal shapes. Consequently, extruded products are used in a range of applications, including construction (e.g. window frames, doorframes, and other architectural products), automotive, and industrial uses. Extrusions are produced in a huge variety of shapes, including rods, bars, tubing profiles, and forge stock, among others.
20. The same basic manufacturing process is used for all extrusion products, regardless of the end-use application. In some specific cases, however, a process involving additional steps is necessary for the production of some specialty extruded products. For instance, this is the case for multi-port extrusions ("MPEs"), which are small but important components widely used in the automotive industry for the manufacturing of condensers and evaporators.
Figure 3 – Multi-port extrusions (MPEs)
(...PICT...)
21. The proposed transaction gives rise to horizontal overlaps between the Parties' activities as regards (1) general soft-alloy extrusions; (2) MPEs; (3) a downstream market: building systems; and (4) a neighbouring product market: precision welded tubes. The Parties' activities do not overlap in precision drawn tubes. [5]
22. The proposed transaction also gives rise to vertical relationships with respect to the following: (1) Hydro's primary aluminium activities upstream and the Parties' soft-alloy extrusions activities downstream; and (2) the Parties' aluminium flat products activities upstream and the Parties' precision welded tubes activities downstream.
III.2. Relevant product market
III.2.1 Soft-alloy extrusions
23. There are two broad categories of alloys used for extrusion: hard-alloys and soft-alloys.
24. In previous decisions, the Commission has identified separate markets for hard-alloy and soft-alloy extrusions. [6] Although some companies manufacture both hard and soft-alloy extrusions, not all extrusion facilities operate with both types of alloy since different treatment processes are used in the preparation of hard-alloys.
25. In the past, the Commission has also concluded that the market for soft-alloy extrusions should not be further divided into segments relating to alloys, [7] shapes or end-uses. [8] Although from a demand-side perspective different shapes and alloys are often not substitutes to each other, there is significant supply-side substitutability, which allows many extruders to produce a wide range of products.
26. The Parties submit that, in line with Commission's precedents, the relevant product market comprises all soft-alloy extrusions.
27. Respondents to the Commission's requests for information confirmed that hard alloy extrusions constitute a separate market from soft alloy extrusions. [9] The replies received also confirmed the Commission's precedents regarding different types of alloys and shapes
28. The Commission investigated whether it would be appropriate to define a separate market for profiles for the automotive industry, since only a limited number of suppliers, which have to go through a certification process, produce extrusions for the automotive industry. The results of the investigation confirmed that automotive manufacturers should be ISO/TS 16949 certified and that almost all extruders are able to obtain such...
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