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News 13.05.2011

Mergers: Commission Clears Proposed Merger Of The Orange Juice Businesses Of Votorantim And Fischer

The European Commission has approved under the EU Merger Regulation the creation of a…

The European Commission has approved under the EU Merger Regulation the creation of a joint venture between the Brazilian groups Votorantim and Fischer that will combine their respective activities in the orange juice sector. Although the merger will create the world's largest wholesale supplier of orange juice, the Commission concluded, after an in-depth investigation, that there would remain sufficient competition from a number of companies in Europe and worldwide.

Commission Vice President in charge of competition policy Joaquín Almunia said: "After a careful and exhaustive assessment of this proposed transaction, the Commission is satisfied that there will remain sufficient competition and that European consumers will not be negatively impacted."

Votorantim and Fischer, two Brazilian firms, notified the European Commission at the end of November of their plans to combine their respective Citrovita and Citrosuco orange juice operations. They requested regulatory clearance from the Commission because their sales in Europe exceed the thresholds that trigger EU jurisdiction over mergers and acquisitions.

The Commission started an in-depth investigation in January over concerns the merged entity might be able to increase prices for customers (see IP/11/16). The joint venture creates the world's largest producer and supplier of orange juice to companies that supply end consumers with branded or private label products. It will also hold important market positions in a number of by-products obtained from the orange juice extraction process, such as orange oils and essences, orange pulp and citrus pellets. The by-products are used in the production of chemicals and solvents, aromas and fragrances, paints and cosmetics and animal feed. The companies' activities mostly overlap in the market for frozen concentrated orange juice (FCOJ).

The Commission’s in-depth examination showed that despite the joint venture's leading position on the orange juice market, it would continue to face competitive pressure from other established suppliers. It showed that these suppliers would not be restricted in their access to fresh oranges and would therefore be able to counteract any strategy on the part of the joint venture to increase prices by reducing output. The Commission's in-depth investigation also revealed that many customers have multiple sources of supply and that switching costs are low given the commodity-type nature of the orange juice produced by the joint venture and its competitors.

The in-depth investigation also ruled out the possibility that the creation of the joint venture could lead to an increased risk of coordination on the orange juice market as the transaction increases the asymmetry in market shares between the main suppliers and does not appear to change the current situation in a way that would make coordination more likely, stable or effective.

The Commission also concluded that the proposed joint venture would not lead to anticompetitive harm in the NFC (not from concentrate) orange juice market in which Citrovita is not active at present but could have been a potential competitor to Citrosuco.

In the case of the by-products obtained from the orange juice extraction process, the Commission concluded that the joint venture would continue to face competitive pressure from the same companies that are already active on the orange juice market. In addition, alternatives exist for some of the by-products in certain end applications.

The Commission, therefore, concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.

Background on companies

Votorantim is a large industrial conglomerate with activities in sectors including cement and concrete, mining and metallurgy, paper, financial services and chemicals. Votorantim's orange juice activities are carried out by its subsidiary Citrovita which produces and supplies frozen concentrated orange juice (FCOJ). FCOJ is the term given to orange juice from which excess water has been evaporated prior to shipping. FCOJ has to be reconstituted before final consumption.

Fischer is active in the provision of maritime services to petroleum platforms and, via its subsidiary Citrosuco, the production and wholesale of fruit juices including FCOJ and NFC (not from concentrate orange juice). In contrast to FCOJ, NFC does not undergo an evaporation process and therefore retains its original volume.


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