Commission, January 22, 2020, No M.9644

Subject: Case M.9644 – NORDSTJERNAN / MOMENTUM GROUP

Commission decision following a reasoned submission pursuant to Article 4(4) of Regulation No 139/2004 (1) for referral of the case to Finland, Sweden and to Article 6(4) of Protocol 24 to the Agreement on the European Economic Area for referral of the case to Norway. (2)

Dear Sir or Madam,

1. INTRODUCTION

(1)    On 6 December 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”) and to Article 6(4) of Protocol 24 to the Agreement on the European Economic Area (the “EEA Agreement”) with respect to the proposed acquisition of Momentum Group AB (“Momentum Group”, Sweden) by Nordstjernan AB (“Nordstjernan”, Sweden). Nordstjernan and Momentum Group are further referred to as the “Parties”. The Parties request the operation to be examined in its entirety by the competent authorities of Finland, Sweden and Norway (namely, the Kilpailu- ja kuluttajavirasto, the Konkurrensverket and the Konkurranse Tilsynet, respectively).

(2)    According to the rules governing the referral system of the Merger Regulation and the EEA Agreement, 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, or the EFTA State, where the concentration may significantly affect competition in a market within such a state which presents all the characteristics of a distinct market.

(3)    A copy of this Reasoned Submission was transmitted to all EU Member States and EFTA States on 6 December 2019.

(4)    By letters of 19 and 27 December 2019 and 8 January 2020, the competent authorities of Sweden, Norway and Finland, respectively, informed the Commission that they agree with the proposed referral.

2. THE PARTIES AND THE PROPOSED TRANSACTION

(5)    Nordstjernan is a Swedish family-controlled investment group investing in listed and unlisted companies located in the Nordic countries. Nordstjernan is active in the distribution of tools, machinery and other supplies via its subsidiary Swedol AB (“Swedol”).

(6)    Momentum Group is a Swedish company active in the distribution of tools, machinery and other supplies and the supply of industrial components and consultancy services mainly in Sweden, Finland and Norway.

(7)    Nordstjernan currently holds 14.8% of the shares and 22.9% of the votes in Momentum Group.

(8)    The proposed transaction involves the acquisition of sole control by Nordstjernan of Momentum Group (the “Transaction”). The Transaction has an EU dimension within the meaning of Article 1 of the EU Merger Regulation.

(9)    The Transaction will be implemented by means of a public offer made by Momentum Group on all shares in Swedol, as announced on 11 November 2019, whereby Momentum Group has offered Swedol’s shareholders the option to choose between a cash consideration or a consideration consisting of newly issued shares in Momentum Group.

(10)   Nordstjernan has entered into an irrevocable undertaking to accept the share consideration alternative. Consequently, Nordstjernan's shareholding in Momentum Group will increase from 14.8 % of the shares and 22.9 % of the votes to approximately 43.2 - 52.7 % of shares and 43.7 - 51.8 % of votes in Momentum Group. Accordingly, Momentum Group’s public offer for the shares in Swedol will result in Nordstjernan acquiring sole control over Momentum Group, irrespective of the extent to which other Swedol shareholders will opt for the share consideration. This is because, based on previous records, attendance at the annual Momentum Group meetings is not expected to exceed 65 % of votes (62 % in 2019 and 55 % in 2018), meaning that Nordstjernan will represent over 50 % of the votes and hold sole control over Momentum Group. Decisions at Momentum Group’s shareholding meetings are normally taken by 50 % vote of those present.

3. EU DIMENSION

(11)   The Transaction has a Union dimension as the turnover thresholds set out in Article 1(2) of the Merger Regulation are met. The combined aggregate worldwide turnover of the Parties is more than EUR 5 000 million (Nordstjernan EUR 8 389 million, Momentum Group EUR 587 million) and the aggregate Union-wide turnover of each of the Parties is more than EUR 250 million (Nordstjernan EUR 7 162 million, Momentum Group EUR 407 million). Momentum Group achieves more than two- thirds of its Union-wide turnover within one and the same Union member State (Sweden, EUR 298 million), but Nordstjernan does not.

(12)   The notified operation therefore has an EU dimension within Article 1(2) of the Merger Regulation.

4. ASSESSMENT

(13)   On the basis of the information submitted in the Reasoned Submission, the activities of Nordstjernan and Momentum Group overlap in the retail distribution of (i) tools, machinery and other supplies (“Tools and Supplies”) and (ii) workwear and personal protection equipment (“Workwear and PPE”) to professional customers in Sweden, Norway and Finland. According to the Parties, their presence outside of Sweden, Norway and Finland is insignificant and/or without overlap. Both Nordstjernan and Momentum Group distribute their products mainly through physical stores, complemented to some extent by online sales.

4.1. Relevant markets

Relevant product market

(14)   The Commission has previously considered that the retail distribution of installation products constitutes a separate product market. The Commission has also considered whether it would be appropriate to segment the overall product market for the retail distribution of installation products into (i) heating and plumbing, (ii) electrical, and (iii) tools and machinery. However, this question has been left open. (3)

(15)   The Commission has further considered, but left open, a possible segmentation between the retail sale of installation products to (i) professional and (ii) non- professional customers. (4)

Relevant geographic market

(16)   The Commission considers that the relevant markets for the retail distribution of Tools and Supplies are either national or local in scope, in line with its decisional practice. (5)

4.2. Assessment of the referral request

4.2.1. Legal requirements

(17)   According to the Commission Notice on case referral (the “Notice”), (6) in order for a case to be referred by the Commission to one or more Member States or EFTA States pursuant to Article 4(4) of the Merger Regulation and Article 6(4) of Protocol 24 to the EEA Agreement, (7)  the following two legal requirements must be fulfilled:

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

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

(18)   With regard to the first requirement, the proposed transaction  may significantly affect competition in the supply of Tools and Supplies or Workwear and PPE in national or local markets in Sweden, Norway and Finland.

(19)   In Sweden, the combined market share of the parties in a potential overall national market for the supply of Tools and Supplies (including Workwear and PPE) would amount to [20-30]% (with an increment brought about by the Transaction of [5-10]%). In a potential narrower national market for the supply of Workwear and PPE the combined market share of the parties would amount to [20-30]% (with an increment brought about by the Transaction of [5-10]%). Moreover, in the event that the market for the supply of Tools and Supplies were to be considered local in scope, the combined market share of the parties in the supply of Tools and Supplies (including or excluding Workwear and PPE) would be (sometimes significantly) higher than 20 % in more than 20 Swedish cities.

(20)   In Norway, the combined market share of the parties in a potential overall national market for the supply of Tools and Supplies (including Workwear and PPE) would be lower than 20 %. However, in a potential narrower national market for the supply of Workwear and PPE the combined market share of the parties would amount to [15-25]% (with an increment brought about by the Transaction of [5-10]%). Moreover, in the event that the market for the supply of Tools and Supplies were to be considered local in scope, the combined market share of the parties in the supply of Tools and Supplies (including or excluding Workwear and PPE) would be higher than 20 % in the cities of Drammen, Fredrikstad, Kristiansand and Trondheim.

(21)   In Finland, the combined market share of the Parties in the potential national markets for the supply of Tools and Supplies, including or excluding Workwear and PPE,  and the supply of Workwear and PPE would be lower than 20%. However, in the event that the market for the supply of Tools and Supplies were to be considered local in scope, the combined market share of the parties in the overall supply of  Tools and Supplies (including Workwear and PPE) in the city of Turku would amount to [20-30]% (with an increment brought about by the Transaction of  [0-5]%). Moreover, the combined market share of the parties in the supply of Tools and Supplies excluding Workwear and PPE in the city of Turku would amount to [30-40]% (with an increment brought about by the Transaction of [0-5]%).

(22)   With regard to the second requirement, the Commission considers that the relevant retail markets are national, or smaller than national. Furthermore, the markets in question present all the characteristics of distinct markets. Therefore, for the  purposes of this decision, the second legal requirement set forth by Article 4(4) of  the Merger Regulation and Article 6(4) of Protocol 24 to the EEA Agreement is met.

(23)   In view of the foregoing, the preliminary assessment suggests that the principal effects of the proposed operation would be restricted to national or local markets in Sweden, Norway and Finland.

4.2.2. Additional factors

(24)   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”.

(25)   In addition, point 22 of the Notice states that “to the extent that the case gives rise to competition concerns which, despite involving national markets in more than one Member State, do not appear to require coordinated investigation and/or remedial action, a referral may be appropriate”.

(26)   Moreover, point 23 of the Notice provides 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”.

(27)   All of these considerations apply in this case. First, given that the likely focus of the competitive effects of the Transaction is confined to national or local markets in Sweden, Norway and Finland, the national competition authorities of Sweden, Norway and Finland, respectively, are well placed to examine the case. Furthermore, despite involving national or local markets in more than one Member State, the competition concerns that may arise from the Transaction do not appear to require coordinated investigative efforts or coordinated remedial action. In this regard, any potential competition concern could be addressed by way of non-conflicting remedies. Third, according to the information provided by the parties, the national competition authorities of at least Sweden and Norway have previous experience in assessing the supply of  Tools  and  Supplies  and  Workwear and  PPE.  Lastly, the question whether a referral would deprive the merging parties of the benefit of a one- stop-shop is not pertinent in this case given that the referral has been triggered by a voluntary request from them.

4.2.3. Conclusion on referral

(28)   On the basis of the information provided by the parties in the Reasoned Submission, the case meets the legal requirements set out in Article 4(4) of the Merger  Regulation and Article 6(4) of Protocol 24 to the EEA Agreement in that the concentration may significantly affect competition in markets within two Member States and an EFTA State, which present all the characteristics of distinct markets.

(29)   Furthermore, the requested referral is consistent with points 19-23 of the Notice, in particular because the Swedish, Norwegian and Finnish competition authorities appear to be the most appropriate authorities to consider the Transaction.

5. CONCLUSION

(30)   For the above reasons, and given that Finland, Sweden and Norway have expressed their agreement, the Commission has decided to refer the transaction in its entirety to be examined by these countries. This decision is adopted in application of Article 4(4) of the Merger Regulation and Article 6(4) read in conjunction with Article 6(1) of Protocol 24 to the EEA Agreement.

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').

3              See case M.4050 – Goldman Sachs/Cinve/Ashlsell.

4              See case M.4050 – Goldman Sachs/Cinve/Ashlsell.

5              See case M.4050 – Goldman Sachs/Cinve/Ashlsell.

6              Commission Notice on Case Referral in respect of concentrations (OJ C 56, 5.3.2005, p. 2-23).

7              The guidance provided in the Commission Notice on case referral applies to the referral rules contained in the EEA Agreement.