European Commission - Press release
Mergers: Commission approves Südzucker's acquisition of control over ED&F MAN subject to conditions
Brussels, 16 May 2012 – Following an in-depth review, the European Commission has cleared under the EU Merger Regulation the proposed acquisition of control by Südzucker of Germany, Europe's largest sugar producer, over ED&F MAN of the UK, the second largest sugar trader worldwide and a company also active in sugar production. The approval is conditional upon the divestiture of ED&F MAN's interests in the Brindisi refinery, the biggest and most modern production facility in Italy.
“Sugar is an important nutritional element and an essential ingredient for the food and beverages industry. The current high prices and scarcity of sugar across the EU make it all the more important to maintain competition on the already concentrated European sugar markets. The divestment of the Brindisi refinery ensures that the merged entity will face a viable competitor in the Italian market." said Joaquín Almunia, Commission Vice President in charge of competition policy.
The Commission's in-depth investigation focused on the supply of refined sugar to food and beverage industrial processors in Italy where the proposed transaction would have brought ED&F MAN's participation in the Brindisi refinery under the control of the current market leader, Südzucker. The proposed transaction would have eliminated current and potential competition between the parties and created a dominant player with market shares above 50%.
In order to address these competition concerns, the parties offered to fully divest ED&F MAN's shareholding in the Brindisi refinery. Because of the current scarcity and high price of preferential raw cane sugar - i.e. raw cane sugar not subject to import duties or quotas - the parties also committed to transfer to the purchaser the long-term contracts through which Brindisi obtains sufficient raw cane sugar input from providers at competitive prices. These commitments ensure that the Brindisi refinery will remain a viable and competitive force in Italy, independent from the merged entity.
The Commission also found that the proposed transaction raised no competition concerns for the supply of raw cane sugar and molasses in the EU, the supply of refined sugar in Greece and the wholesale supply of refined sugar to retailers in Italy.
The Commission was therefore able to clear the merger on the basis of the commitments proposed.
Refined sugar is produced either from beet, grown in Europe, or from cane, grown in tropical areas outside Europe. The EU Common Agricultural Policy subjects the European sugar markets to production quotas and import restrictions. At the production level the degree of concentration and entry barriers in several Member States are high. Currently EU sugar markets are experiencing a period of high prices and sugar scarcity.
The Court of Auditors in its special report on the results of the sugar reform1 has stressed that "[t]he Commission and the Member States must ensure that competition law is correctly enforced in the sector thus ensuring the Treaty objective that supplies reach consumers at reasonable prices".
The Commission's investigation confirmed that as regards Italy the market for the supply of sugar to industrial customers remains national. The significant imports into Italy are not a sign of functioning cross-border price arbitrage, but a consequence of the limited Italian production quota imposed by regulation.
The newly-built Brindisi refinery started operating in December 2012 and is designed to produce large quantities of refined sugar in particular for the Italian market. It is strategically located in the centre-south of Italy, a region without hardly any beet sugar production. It is one of the most modern and the second biggest raw cane sugar refinery in Europe.
The proposed transaction was notified to the Commission for regulatory approval on 19 September 2011. On 9 November 2011, the Commission opened an in-depth investigation. The parties were advised in a Statement of Objections adopted on 14 February 2012 that the merger as initially notified raised serious concerns and, in the absence of a sufficient remedy, might be prohibited.
Companies and products
Südzucker is a German food company active in the areas of sugar production and marketing, food additives, frozen food, portioned food articles, bioethanol production and fruit juices concentrates and preparations. Südzucker produces sugar in 29 beet sugar factories and three refineries in Germany, Belgium, Bosnia-Herzegovina, France, Poland, Austria, Slovakia, the Czech Republic, Hungary, Moldova and Romania.
ED&F MAN is primarily a commodity trading company and also has participations in production facilities. Its product portfolio comprises sugar, liquid by-products of sugar production such as molasses, coffee, tropical oils and biofuels. ED&F MAN also provides logistic and financial services.
Merger control rules and procedures
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).
There are currently three other ongoing phase II merger investigations. The first one concerns the proposed acquisition of EMI's recorded music business by Universal (see IP/12/311), with a deadline on 06/09/2012. The second ongoing phase II investigation was opened in March into the proposed acquisition of control over Goodrich by United Technology in the aviation equipment sector (see IP/12/308). The deadline here is 31/08/2012. Finally, on 13 April, the Commission has opened a second phase investigation into the creation of a mobile commerce joint venture by UK mobile operators Telefónica, Vodafone and Everything Everywhere (see IP/12/367). The deadline for a final decision in this case is 19/09/2012.
A non-confidential version of today's decision will be available at:
Antoine Colombani (+32 2 297 45 13)
Marisa Gonzalez Iglesias (+32 2 295 19 25)
Special Report No 6 by the Court of Auditors "Has the reform of the sugar market achieved its main objectives?" – 2010, p.45 ("Recommendation 4").