Case No COMP/M DUPONT / SABANCI. REGULATION (EEC) No 4064/89 MERGER PROCEDURE. Article 6(1)(b) NON-OPPOSITION Date: 24/11/1999

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1 EN Case No COMP/M DUPONT / SABANCI Only the English text is available and authentic. REGULATION (EEC) No 4064/89 MERGER PROCEDURE Article 6(1)(b) NON-OPPOSITION Date: 24/11/1999 Also available in the CELEX database Document No 399M1538 Office for Official Publications of the European Communities L-2985 Luxembourg

2 COMMISSION OF THE EUROPEAN COMMUNITIES Brussels, SG (99) D/9436 In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EEC) No 4064/89 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 Where possible the information omitted has been replaced by ranges of figures or a general description. PUBLIC VERSION MERGER PROCEDURE ARTICLE 6(1)(b) DECISION To the notifying parties Dear Sirs, Subject: Case No COMP/M DuPont / Sabanci Notification of pursuant to Article 4 of Council Regulation No 4064/89 I. BACKGROUND 1. On 23/09/1999, the Commission received a notification of a proposed concentration, by which the undertakings E.I. du Pont de Nemours ( DuPont ) and Haci Ömer Sabanci Holding A.S. ( Sabanci ) acquire joint control of a newly created company. This notification was declared incomplete and on the the parties filed a complete notification. The present operation is part of a global restructuring of DuPont s polyester activities (see below). II. THE PARTIES 2. Dupont is a global, diversified U.S. based corporation. The company is engaged in the research, development, distribution, and sale of a variety of chemical products, manmade fibres, plastics, agro-chemicals, paints, seeds, pharmaceuticals and other materials. 3. Sabanci is a conglomerate holding company based in Turkey. It has interests in undertakings engaged in production and sale of textiles, polyester products, chemicals, financial services, cement, automotive sector, food, tobacco, retail sector and others. Rue de la Loi 200, B-1049 Bruxelles/Wetstraat 200, B-1049 Brussel - Belgium Telephone: exchange Telex: COMEU B Telegraphic address: COMEUR Brussels.

3 III. CONCENTRATION 4. The transaction concerns the formation of a joint venture to develop, manufacture and sell various polyester products. DuPont and Sabanci will acquire joint control of a newly created company constituting a full function joint venture. Consequently, the transaction is a concentration within the meaning of Article 3(1)(b) of the Merger Regulation. IV. COMMUNITY DIMENSION 5. The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 2,500 million 1 (DuPont EUR: [ ] million; Sabanci EUR: [ ] million). In each of three Member States, the combined aggregated turnover of the undertakings was more than EUR 100 million in 1998 (France, Germany and Italy). In each of the same three Member States, the aggregated turnover of each of the undertakings was more than EUR 25 million in The aggregated Community-wide turnover of each of the two undertakings was more than EUR 100 million in 1998 (DuPont EUR: [ ] million; Sabanci: EUR [ ] million). None of the undertakings achieved in 1998 more than two-thirds of their aggregate Community-wide turnover within one and the same Member State. Consequently, the notified operation has a Community dimension according to Article 1(3) of the Merger Regulation. Furthermore, it does not constitute a co-operation case under the EEA Agreement, pursuant to Article 57 of that Agreement. V. RELEVANT MARKETS Relevant product markets 6. The base chemical for the production of polyester is paraxylene ( PX ). Through an oxidation process, PX is transformed into pure terephthalic acid ( PTA ) or di-methyl terephthalate ( DMT ), two forms of terephthalic acid. An amorphous polyester polymer ( APP ) is then created by reacting either PTA or DMT with a di-functional alcohol, most often mono-ethylene glycol ( MEG ). APP is used to generate a variety of end products, which can be segmented into six general categories: 2 : Polyester resins, Polyester staple fibre Polyester filament yarn Polyester film/ PET film Engineering polymers, and 1 Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission Notice on the calculation of turnover (OJ C66, , p25). To the extent that figures include turnover for the period before , they are calculated on the basis of average ECU exchange rates and translated into EUR on a one-for-one basis. 2 For example IV/M.1337 Koch/Saba/Hoechst 2

4 Industrial yarn, 7. The joint venture will be active in polyester resins, polyester staple fibre, and polyester filament yarn, but not in polyester film, engineering polymers, or industrial yarn, where DuPont and/or Sabanci will remain independently active. Furthermore, DuPont and Sabanci will contribute their polyester intermediates activities (DMT and PTA) to the joint venture. 8. Third parties have largely confirmed the appropriateness of the above product categories. A few third parties have suggested that PE resins should be further subdivided into a) bottle grade, b) fiber grade and c) film grade. However, in any case for the purpose of the present case it is not necessary to finally decide the product market definition, since the operation does not lead to the creation or strengthening of a dominant position in any market. Geographic markets 9. In previous Commission decisions the geographic market of some of the polyester enduse segments were assessed to be at least as broad as Western Europe (the EEA and Switzerland) and probably world-wide. However, the questions are left open, since the operations did not raise issues of dominance under either definition The parties submit that the three polyester end-use segments affected by the merger and the two intermediates PTA and DMT are Western European in scope. The Commissions investigation tended to confirm that the geographic scope is at least as wide as Western Europe. This appears in particular to be the conclusion regarding PE resins and polyester staple fibres. Some third parties would in addition to Western Europe include Central and Eastern Europe. Others submit that Turkey should be included in the relevant geographic market for PET resins and polyester staple fibres due to the fact that such products from Turkey has duty free access to the EU. In any case, for the purpose of the present case it is not necessary to decide whether the scope of the relevant market is Western Europe or wider, since the operation does not lead to the creation or strengthening of a dominant position in any market. VI. COMPETITIVE ASSESSMENT 11. DuPont is one of the largest producers in the world of polyester for different end-use applications and a large producer of polyester intermediates. DuPont is in the process of restructuring its polyester business. According to the parties the main purpose of the restructuring is to reduce costs. This will be achieved by combining the existing DuPont polyester activities with a number of low cost joint venture partners in different geographic regions of the world. Each of these joint ventures are expected to operate as independent and autonomous entities. The proposed joint venture is part of this restructuring. 12. Other joint ventures may be notified in the future as part of this restructuring.[ ]. 13. Outside the joint venture, DuPont will remain active in polyester film and engineering polymers. With regard to both these product segments DuPont accounted for around 3 Cf. footnote 2. 3

5 30-35 % of 1998 Western European sales. As mentioned Sabanci is not active in these downstream polyester categories. Polyester film is the subject of the notification of COMP M DuPont/Teijin. Polyester resins 14. The parties have combined market share of [<15] % by volume in Western Europe and combined share of [<10] % of the global capacity. These figures have largely been confirmed by third parties. Consequently, the operation does not lead to the creation or stengthening of a dominant position in polyester resins. Polyester staple fibre 15. The parties combined market share is [<10] % by volume in Western Europe. If the geographic scope of the market were defined as global the parties would obtain a combined market share of [<10] % of the global capacity. Accordingly the operation does not lead to a dominant position under either definitions of the market for polyester staple fibre. Polyester filament yarn 16. The parties combined market share is about [5-10] % by volume in Western Europe. If the geographic scope of the market were defined as global the parties would obtain a combined market share of [<10] % of the global capacity. Therefore, the operation does not lead to the creation or strengthening of a dominant position. Polyester intermediates (PTA and DMT) 17. The parties will contribute their respective polyester intermediate activities to the joint venture. DuPont accounted for around [<25] % of the PTA sales in Western Europe in Sabanci does not produce or market PTA. DuPont has no Western European operations in DMT, although it does produce and sell DMT elsewhere in the world. Sabanci only produces DMT for captive consumption and has no merchant market business. 18. Third parties have submitted that Dupont has a market share in the range of % of PTA total sales by volume in Western Europe. However, according to third parties there are strong competitors with sound technical and financial capabilities. Furthermore, according to third parties there are possibilities to import PTA from outside Western Europe. 19. Therefore, it can be concluded that the operation will not lead to the creation or strengthening a dominant position due to the combination of the parties actitivites in polyester intermediates. VII. ANCILLARY RESTRAINTS 20. The parties have notified a number of clause and agreements as ancillary to the concentration: - The parties have agreed not to make any material change to the respective downstream polyester and polyester intermediates businesses prior to 4

6 completion of the transaction. This agreement can be considered ancillary to the to extent it restricts competition. - The parties will transfer the respective technical expertise and trademarks applied by DuPont and Sabanci to the joint venture. This agreement is an integral part of the operation and, therefore, not ancillary. - The parties have agreed a service agreement for a transition period of [ ] years, whereby the joint venture may call upon the parents for administrative and support services such as accounting, tax, transaction procession and so on. This agreement can be considered ancillary to the extent it restricts competition. The parties have agreed a restrictive covenant whereby the parent companies agree not to compete with the joint venture for the life of the joint venture. The purpose of the non-compete clause is to secure the value of the assets transferred to the joint venture and avoid situations resulting in one party continuing the business of the joint venture on its own and thus benefiting from the key assets made by both parties. This clause is considered as directly related to and necessary to the implementation of the concentration. VIII. CONCLUSION 21. For the above reasons, the Commission has decided not to oppose the notified operation and to declare it compatible with the common market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of Council Regulation (EEC) No 4064/89. For the Commission, Mario MONTI Member of the Commission 5