Completed acquisition by Arcelor SA of Corus group plc's hot-rolled steel sheet piling business

Affected market: Hot-rolled steel sheet piling

No. ME/1141/04

Please note that the full text of the decision can be downloaded by using the link on the right . What follows are extracts regarding the parties, the transaction, jurisdiction, conclusion and decision.

Please note square brackets indicate text either deleted or replaced by a range at the request of the parties for reasons of commercial confidentiality

The OFT's decision on reference under section 22 given on 9 September 2004

PARTIES

Arcelor SA (Arcelor) is headquartered in Luxembourg. It has four core businesses: flat carbon steel; long carbon steel; stainless steel; and steel distribution. Arcelor has a world wide turnover of €25.9 billion, of which €20.1 billion was achieved in the EU. Arcelor's total UK turnover in the last four years has been less than £[] million.

Corus UK Limited (Corus) is a subsidiary of Corus Group PLC. Its UK turnover for sheet piling for year end 3 January 2004 was £[<70] million.

TRANSACTION

On 30 April 2004, Arcelor acquired Corus' UK hot-rolled steel sheet piling ('sheet piling') business ('the Arcelor transaction') consisting of (see note 1):

• goodwill and a small number of employees
• supplier and customer lists including UK mailing lists, customer credit limits, customer payment history and UK transport rates
• product development and design information, including specifications, drawings, data, instruction and training manuals, handbooks, plans instructions, formulae, test results, reports, project reports, testing procedures and tables of operating conditions
• sales, marketing and promotional information, and market forecast
•  technical or other expertise and
• a [ ] year non-compete clause.

The assets acquired by Arcelor did not, therefore, include Corus' production facilities at its Scunthorpe mill. Corus ceased production of sheet piling at its Scunthorpe mill as part of its UK restructuring programme and 'Restoring Success' initiative and closed the operation on 6 July 2004.

The total consideration for the acquisition was £[ ] million, [ ]. The transaction was notified to the OFT on 21 June 2004 by way of an informal submission. The administrative timetable expired on 3 September and the statutory period was extended to 27 September 2004 under section 25(2) of the Enterprise Act 2002.

JURISDICTION

The OFT considers that the combination of assets that have been acquired by Arcelor under this transaction constitutes an 'enterprise' for the purposes of the Enterprise Act 2002. The assets acquired by Arcelor form a crucial part of the sheet piling business and the transaction prevents Corus from re-entering the market for a period of [ ] years and thereafter with any relative ease. As a result of the acquisition the Corus enterprise has ceased to be distinct with the enterprise carried on by or under the control of Arcelor. The transaction qualifies as a relevant merger situation on the basis that the parties' combined share of supply for sheet piling in the UK exceeds the jurisdictional threshold under the Enterprise Act 2002.

CONCLUSION

Arcelor, the largest European supplier of sheet piling, has acquired the sheet piling business of Corus, historically the main UK supplier, with which Arcelor had recently been competing directly. Arcelor's share of an already concentrated market has risen significantly.

Alternative retaining structures such as concrete may exert a competitive constraint in some applications, but it is unclear that this constraint is strong generally.

It is plausible that Corus would have exited in any event, but the parties have not advanced sufficiently compelling evidence for this to be an assumption upon which the OFT can rely in judging whether it may be the case that the merger may result in a substantial lessening of competition. Even if Corus was going to exit in any event, it is possible that a more competitive outcome than acquisition by Arcelor could have come about.

In conclusion, therefore, the OFT believes that it may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore be referred to the Competition Commission under section 22(1) of the Act.

NOTES

1. Arcelor wishes to confirm that this makes up the commercial part of Corus' UK hot-rolled steel sheet piling business.

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