COMMISSION DECISION of 19/04/1999 declaring a concentration to be compatible with the common market (Case No IV/M.1467 - *** ROHM AND HAAS/MORTON) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic) Official Journal C 157 , 04/06/1999 P. 0007 COMMISSION DECISION of 19/04/1999 declaring a concentration to be compatible with the common market (Case No IV/M.1467 - *** ROHM AND HAAS / MORTON) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic) Brussels, 19-04-1999 To the notifying parties Dear Sirs Subject: Case No IV/M.1467-Rohm + Haas/ Morton.
Notification of 2 March 1999 pursuant to Article 4 of Council Regulation (EEC) N 4064/89 (Merger Regulation) 1. On 2 March 1999 "Rohm and Haas" Company ("Rohm and Haas") notified an operation whereby "Rohm and Haas" would acquire sole control of Morton International Inc. (Morton) by means of a cash offer followed by a merger. 2. After examination of the notification, the Commission has concluded that the notified operation falls within the scope of Council Regulation (EEC) N 4064/89 and does not raise serious doubts as to its compatibility with the common market and with the EEA Agreement. I. THE PARTIES' ACTIVITIES AND THE OPERATION 3.
The business activities of the undertakings concerned are for "Rohm and Haas": performance polymers, speciality chemicals and electronic materials and for Morton: the manufacture and marketing of speciality chemicals and salt. Both are present on the Community market and both produce a wide variety of speciality chemicals, "Rohm and Haas" concentrating on polymers derived from acrylic acid and Morton on polyurethane and other non-acrylic chemistries. 4. The concentration concerns the acquisition of full control by "Rohm and Haas" of Morton both U.S. companies. The concentration will be effected in a number of stages.
In the first stage a specially formed subsidiary of "Rohm and Haas" made an conditional cash tender offer for up to two thirds of the outstanding stock of Morton. Provided the minimum condition that 50.1% of the outstanding shares of Morton are tendered is met the specially formed subsidiary of "Rohm and Haas" will be merged into Morton. As a result of this merger the outstanding shares of Morton other than those owned by the specially formed subsidiary of "Rohm and Haas" will be converted into the right to receive newly issued shares of "Rohm and Haas". Following the merger Morton will be a wholly owned subsidiary of "Rohm and Haas".
5. It is expected that subject to regulatory approval the operation will be completed in the second half of May 1999. II. COMMUNITY DIMENSION The parties to the notified concentration have a combined aggregate world-wide turnover in excess of EUR 5000 million. In 1998 "Rohm and Haas"'s turnover was EUR (1) 3320 million and Morton's, for the financial year 1997-98 was EUR 2298 million. Each of the parties has an aggregate Community-wide turnover in excess of EUR 250 million. They do not achieve more than two-thirds of their aggregate Community-wide turnover within one and the same Member State. The notified operation therefore has a Community dimension, meeting the thresholds of the Merger Regulation, as laid down in Article 1.
It does not constitute a co-operation case under the EEA Agreement, pursuant to Article 57 of that Agreement. (1) Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission Notice on the calculation (OJ C66, 2.3.1998, p25). To the extent that the figures include turnover for the period before 1.1.1999, they are calculated on the basis of the average ECU exchange rates and translated into EUR on a one to one basis. III. COMPETITIVE ASSESSMENT A. Relevant product markets 6. Both parties are active in the production and sale of "speciality" chemicals, a term used for chemical compounds with higher added value which have been engineered by the manufacturer to incorporate performance attributes desired for a specific end use, and can thus be distinguished from commodity chemicals.
7. Morton is active in nine speciality chemicals business areas: speciality polymers; adhesives, plastic additives, electronic materials, polysulfide sealants, performance chemicals/advanced materials, dyes and organic specialities, automotive and industrial coatings and powder coatings. 8. The parties' activities overlap in the following limited areas: - Water based polymers, latices - PVC additives - Photo resists - Electronic chemicals Water based Polymers 9. Water-based polymers (latices), mainly used in the paper, construction, carpet, textile and foam industries. Within this overall product description the Commission has, in previous decisions (Case IVM.
751-Bayer/Hüls and M. 376-Synthomer/Yule Catto, M. 1049-Akzo/PLV-EPL and M. 1097-Wacker/Air Products), distinguished between styrene acrylic latices (SA) and pure acrylic latices. 10. Alternatively the acrylic polymers may be distinguished by their applications. In the current case there are overlaps in the application of acrylic polymers for the production of floor polishes and for use in the graphic arts (printing ink, overprint varnishes, etc) PVC Additives 11. In line with previous Commission practice (Case IV/M. 310-Harrison & Crossfield/Akzo, different product markets may be defined according to the function of the additive.
Morton produces essential additives, that is stabilisers and lubricants that are essential to any production of PVC products. On the other hand "Rohm and Haas" produces additives that change the characteristics of the PVC. It is not therefore necessary to define relevant product markets by function for this group of products because there are no overlaps at the narrower market definitions. Photo Resists 12. Photo resists can be divided into two classes, i.e. dry film and liquid. Although these products are used to make the same products, printed wiring (circuit) boards, they are not interchangeable as each requires a different production line suited to the product in question.
Liquid photo resists are normally used in sophisticated and expensive dedicated production lines while dry photo resists offer much greater flexibility. In addition liquid photo resists can only be used on printed circuit boards that have no holes in them. 13. The parties' activities overlap on the market for manufacture and sale of dry film photo resists, which are used in the production of Printed Wiring (or circuit) Boards (PWBs, PCBs) for primary imaging purposes. Dry film photo resist is a light sensitive material composed of a polyester cover sheet, a dry light sensitive photopolymer and a polyethylene release sheet, produced in "master" rolls and then slit to custom size, packaged and shipped to the PWB manufacturer, mainly in the communications equipment sector.
14. There is also an overlap in liquid photo resists. These products are supplied in liquid form and applied in by roller or by passing the board through a curtain of liquid photo resist. To a much smaller degree the boards may be dipped into the material. This last process is used mainly by the smaller producers of PWBs. Electronic Chemicals 15. As far as the parties are concerned these may be divided between process chemicals and solder masks. Process chemicals are used in the manufacture of PCBs. Both parties make developer spray and stripper spray. It is not necessary to decide whether these products form one or two relevant product markets as whichever definition is used there is no affected market.
16. Solder masks are used for containing the solder that is applied in the last stage of manufacture of PCBs. It is not necessary to specify the relevant product market for these products as even on the narrowest possible market definitions the parties' activities only overlap in the field of liquid photoimageable solder masks and this would not be an affected market. B. Relevant geographic market Styrene acrylic latices 17. The geographic market for styrene acrylic (SA) latices is the EEA, in line with previous Commission practice. This finding is based on intra-community trade in latices and the existence of similar price levels (except for small differences due to differing technical specifications).
The major suppliers are all present throughout the EEA. 18. The same is true for the applications made of SA latices for graphic arts purposes and for floor polishes. Pure acrylic latices 19. In a previous decision the Commission has held the geographic market for pure acrylic latices to be at least EEA wide (Case M. 751-Bayer/Hüls) mainly for the same reasons as mentioned under paragraph 12 above, which still are valid. Therefore this market can be held to be EEA wide. 20. The same is thus true for applications of pure acrylic latices for graphic arts and for floor polishes. PVC additives 21.
The geographic market can be held to be EEA wide in view of the high level of intra-Community shipments, relatively low transport costs and the presence of all major suppliers in most Member States. Dry film photo resists 22. The market for photo resists for PWB's can be taken to be EEA wide. Prices are homogeneous throughout the EEA, not differing by more than 5% for similar types, thickness and volumes. Transport costs are negligible in relation to product costs. A substantial part of Community consumption is supplied as "master rolls" which are imported into the EEA and subsequently slit to custom size and packaged.
However this does not imply that the relevant geographic market is larger than the EEA. All of this imported material is further processed within the Community and consumers require quick and reliable delivery. Liquid photo resists 23. Similar considerations apply to liquid photo resists. Prices are similar and transport costs are negligible. A certain level of local technical support is necessary so that the relevant geographic market is the EEA. Process Chemicals 24. The market for process chemicals used in PWB's (development spray and stripper solution spray) and liquid photo-imageable solder masks may be considered to be at least EEA-wide, in view of homogeneous prices and acceptable transport costs overall within the EEA.
C. Competitive Analysis of the Affected markets 25. To a large extent, the operations of the parties to the transaction are complementary, due in part to the different technologies used by the parties, i.e. "Rohm and Haas" is largely active in polymers made from acrylic acid derivatives (constituting 80% of its polymer business) while Morton products are typically based on urethane, polyester, polysulfide and epoxy chemistry and due to the different levels of integration of the parties, i.e. Morton sells formulated products directly to end users, while "Rohm and Haas" typically sells latex emulsions as raw materials to product formulators for further transformation.
Styrene Acrylic Latex 26. The parties combined market share for the supply of styrene acrylic latices in the EEA is approximately [5-15%] in terms of value (Rohm and Haas [5-15%] and Morton [0-10%]). Pure Acrylic Latex 27. Of the parties, only "Rohm and Haas" has significant activities in the production and sale of this product, with production sites in the EEA. In terms of volume and value, its market share in 1998 was approximately [40-50%] and Morton much less than [5%]. Strongest competitors are BASF with [15-25%], Clariant with [10-20%], and Zeneca with [5-15%], ICAP with [0-10%], Elf Atochem with [0-10%] and others having [5-15%].
The parties claim that there are no capacity constraints in this sector and that capacity loading is about [