Office for Official Publications of the European Communities
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EN
Case No COMP/M.4842 DANONE
/ NUMICO
Only the English text is available and authentic.
REGULATION (EC) No 139/2004
MERGER PROCEDURE
Article 6(2) NON-OPPOSITION
Date: 31/10/2007
In electronic form on the EUR-Lex website under document
number 32007M4842
Commission européenne, B-1049 Bruxelles / Europese Commissie, B-1049 Brussel - Belgium. Telephone: (32-2) 299 11 11.
COMMISSION OF THE EUROPEAN COMMUNITIES
Brussels, 31-10-2007
SG-Greffe(2007) D/206733
To the notifying party:
Dear Sir/Madam,
Subject: Case No COMP/M.4842 – Danone / Numico
Notification of 12 September 2007 pursuant to Article 4 of Council
Regulation No 139/20041
1. On September 12, 2007, the Commission received a notification of a proposed
concentration pursuant to Article 4 of Council Regulation (EC) No. 139/2004 ("the
Merger Regulation") by which the French company Danone S.A. (Danone) acquires
within the meaning of Article 3(1)(b) of the Merger Regulation sole control of the Dutch
company Royal Numico N.V. (Numico) by way of purchase of shares.
I. THE PARTIES
2. Danone is a worldwide company based in France and engaged in the production and sale of
fresh dairy products, mineral water and baby food. Danone is also active in biscuits and
cereals products and is in exclusive talks with Kraft foods for the sales of this business2.
3. Numico is a company incorporated in the Netherlands specialized in the manufacture and
distribution of baby food and clinical nutrition products in a large number of countries
worldwide.
1 OJ L 24, 29.1.2004, p. 1.
2 See case COMP/M.4824 Kraft/Danone Biscuits.
PUBLIC VERSION
MERGER PROCEDURE
ARTICLE 6(1)(b) DECISION IN
CONJUNCTION WITH 6(2)
In the published version of this decision, some
information has been omitted pursuant to Article 17(2)
of Council Regulation (EC) No 139/2004 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been replaced by ranges of figures or a general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.
2
II. THE OPERATION
4. On July 9, 2007, Danone and Numico concluded a Merger protocol, pursuant to which
Danone intends to make a recommended public offer, in cash, for all the shares of
Numico. The Offer Memorandum opening the offer period was published on August 20,
2007. The proposed operation constitutes therefore a concentration within the meaning
of the Merger Regulation.
.III. COMMUNITY DIMENSION
5. The undertakings concerned have a combined aggregate world-wide turnover of more than
EUR 5 000 million (EUR 14,073 million for Danone, EUR 2,623 million for Numico).
The aggregate Community–wide turnover of Danone and Numico is more than EUR
250 million (EUR […] million for Danone, EUR […] million for Numico). Neither
Danone nor Numico achieve more than two-thirds of their Community-wide turnover in
the same Member State. The proposed transaction therefore has a Community
dimension within the meaning of Article 1(2) of the EC Merger Regulation.
IV. COMPETITIVE ASSESSMENT
6. The proposed transaction concerns the production and sale of baby food (including baby
milk) products. Danone is active in this segment directly and mainly through its whollyowned
subsidiary Bledina which achieves [80-90] % of its turnover in France. In 2006,
baby food represented [0-10] % of Danone's EEA-wide turnover. By contrast, Numico is
a more global baby food player with operations in the EEA as well as in Russia, Central
and Latin America and the Asia-Pacific region. In 2006, baby food amounted to [50-60]
% of Numico's EEA wide turnover. The Commission recently investigated these baby
food markets in the M.4688 Nestlé-Gerber decision3 , although it did not cover baby
milks.
7. On a general basis, the parties explain that the baby food markets should also include
home-prepared and non-baby specific products (for example: regular food for meals,
cow milk for growing-up milk) since these products are increasingly used as
complements or substitutes to baby food. However, in the Nestlé/Gerber decision, the
Commission stressed that it appeared difficult to consider that baby food and adult food
belong to the same product market (although adult food products have to be taken into
account as potential constraint on baby food producers' behaviour). From the point of
view of consumers, who happen to be very sensitive to the quality of these products,
regular products do not address the specific nutritional needs of their babies and baby
food products are packed, priced, promoted and advertised differently from adult food.
Furthermore, all retailers hold dedicated shelf-space for manufactured baby food which
differentiates it clearly from similar adult food. Supply-side substitutability appears
limited as well, in view of the stringent regulatory provisions that set specific
requirements on raw materials and hygiene conditions at baby food production sites.
8. This distinction between baby food and regular/home made food has been confirmed by
respondents to the market investigation. Accordingly and in line with its previous
findings, the Commission will assess the impact of the transaction on specific product
markets for baby food, which will be discussed further below. The potential competitive
3 Decision COMP/M.4688 Nestlé/Gerber of 27 July 2007.
3
constraints exercised by non-baby food products, which might fluctuate according to the
various baby food product markets, will be taken into account in the competitive
assessment.
Relevant product markets
1. Baby milk
9. Baby milks include all milks in powder and liquid form primarily intended for feeding
infants and toddlers from 0 to 36 months. The parties submit that two different
categories of baby milk may be identified and constitute distinct product markets: i)
Infant and Follow-on Milk (IFFO milk) and ii) Growing-Up Milk (GUM). This is in line
with the findings of the UK Monopolies and Merger Commission (current Competition
Commission) which has dealt with these markets before4.
IFFO
10. IFFO milks designate nutritional milks for babies aged 0 to 12 months which are used as
substitutes for human breast milk. In France, where the activities of the parties overlap
for baby milk, IFFO milk is mainly sold in powder format, requiring the addition of
water.
11. Besides breast milk, IFFO milk is the only milk that the medical community considers
as nutritionally acceptable for infants under the age of one year5. IFFO milks are subject
to strict regulatory requirements in Europe and the Directive 2006/141/EC of 22
December 2006 regulates the marketing of IFFO milk in the Community. The directive
includes mandatory requirements for the labelling (e.g. a statement related to the
superiority of breast milk) and strict restrictions about advertising. The parties submit
that IFFO milk is a distinct product market for the purposes of this assessment.
12. Applicable EC legislation distinguishes two main types of IFFO milk: infant milk for
babies aged 0-6 months and follow-on milk for babies aged 6-12 months. Both products
are distinct in terms of composition, are sold under slightly different packaging and
regulatory requirements on follow-on milk are less demanding. However respondents to
the market investigation indicated that the moment when parents should use follow-on
milk is not clearly defined (between 4 and 6 months, depending on the circumstances)
and consumers tend to remain loyal to a brand when they shift to follow-on milks. In
any event, the question of distinct product markets for infant and follow-on milks can be
left open as it would not substantially change the conclusions of the competitive
assessment.
13. The IFFO milk market may further be segmented according to the distribution channel
(retail channel or pharmacy). In France, a substantial part of the infant milk ([35-45] %)
and follow-on milk ([15-25] %) is sold through pharmacies and some competitors are
only active in the pharmacy channel (Lactalis-Picot, United Pharmaceuticals, and Mead
Johnson). Market presence may also vary significantly from one channel to another. For
4 Monopolies and Mergers Commission: "NV Verenigde Bedrijven Nutricia and enterprises belonging to
Milupa AG: A report on the merger situation", August 1996
5 Cow's milk is not recommended because of its high protein and salt content, which may put a strain on
infant immature's kidneys.
4
instance, Nestlé has in France a market share of [35-45] % in the retail channel and [5-
10] % in the pharmacy channel. There are also some differences in the products sold
(therapeutic milks are only purchased in pharmacies, see below) and the purchasing
pattern: parents make their own choices in retail stores whilst they usually rely on
specialist's advice in the pharmacies. Nevertheless, it is not necessary to make a further
distinction within IFFO milk according to the distribution channel since it would not
significantly alter the competitive assessment.
14. Finally, within IFFO milks, a further distinction can be made between standard and
therapeutic milks: therapeutic milks are milks intended for babies with particular
digestive or health problems (milks for premature babies, anti-regurgitation milks, and
milks without lactose, anti-diarrheic milks, anti-regurgitation milks or allergy treatment
milks). Therapeutic milks, which are only sold in the pharmacy channel, are on average
40-50% more expensive than standard IFFO milks.
15. One competitor indicated during the investigation that "medical milk", which is a
subcategory of therapeutic milks, can be seen as a separate product market. This
competitor underlines that medical milks deliver nutritional solutions for infants and
babies that have specific health conditions which prevent them from using "standard
therapeutic milks". These milks can only be purchased with a doctor's prescription and
are typically reimbursed by the healthcare system.
16. The Commission notes that such a market definition is neither supported by any other
third party submission nor by firmer evidence. First, it appears that therapeutic milks
and "medical milks" both provide a therapeutic support in addition to their nutritional
functions and are both intended for babies with specific therapeutic needs. As regards
reimbursement, the Commission notices that some "standard therapeutic milks" (for
instance Numico's product Pepti Junior, which is a partially hydrolyzed milk with a low
lactose content aiming at reducing allergy symptoms) are also reimbursed by the
healthcare system. As regards some very specific products manufactured by Numico
(such as Neocate, an amino acid-based formula for serious allergic conditions), the
Commission believes that they should rather be considered as healthcare nutrition
products6 for infants in view of their very specific therapeutic indications7. Therefore,
the Commission does not take the view that medical milks should be considered as a
distinct product market.
17. As regards a distinction between standard and therapeutic milks, the Commission notes
that suppliers of IFFO milk typically offer a range of products covering the majority of
therapeutic indications and that manufacturers having entered the market with
therapeutic milks are now expanding into standard IFFO milk products. Hence there
appears to be a certain level of supply-side substitutability between standard milks and
therapeutic milks. Nevertheless, it is not necessary to make a further distinction between
regular and therapeutic milks since it would not change the competitive assessment.
6 See decision Case COM/M.4540 Nestlé/Novartis (Medical nutrition business) of 29 June 2007.
7 See list of products reimbursed by the French Healthcare system available at
http://www.ameli.fr/fileadmin/user_upload/documents/References_juridiques_secteur_pharmacie.pdf
(page 168). The Neocate is listed an oral supplementation product.
5
18. Based on the above arguments, the Commission considers that IFFO milk is a distinct
product market for the analysis of the present transaction.
GUM
19. GUM milks are nutritional milks for children 1-3 years. They exist in both powder and
liquid formats although the latter (bottle or tetra pack format) is prevalent in Western
Europe. They are almost exclusively sold in the retail channel and average price of
GUM is much lower (30-35%) than the average price of IFFO8.
20. The parties submit that GUM competes with cow milk as well as other baby food
products (sweet meals, baby cereals and baby snacks, see below) since the children's
diet becomes more diversified after the age of one. According to the parties, in France
and Belgium, the only two markets where the parties' activities in GUM overlap, GUM
represents respectively 27% and 20% of the milk fed to children between the age of 16
and 36 months.
21. The market investigation has however highlighted that GUM is enhanced with nutrients
appropriate for the developing needs of children, particularly a stronger iron content.
Therefore, the majority of the parties' competitors in baby milk do not view cow milk as
an adequate alternative for GUM. According to some respondents, the proportion of
parents feeding cow's milk to their 1-3 year children is decreasing, due to the stronger
awareness within the medical community that GUM is necessary for the child's growth
and well-being.
22. Furthermore, the price of GUM is on average twice as high as the price of cow's milk.
Parents who decide to feed their babies with GUM have consequently already made a
choice for a product which is more expensive than cow's milk. Therefore, it is unlikely
that these customers would switch to cow's milk in case of a small but significant
increase of the price of GUM (in the range of 5-10%) since they are already convinced
that GUM is necessary for their children despite its current higher price.
23. Based on the above, the Commission considers that GUM is a distinct product market
for the purposes of this assessment.
2. Baby food
24. In line with the Commission's findings in the Nestlé/Gerber case, the parties submit that
there are three segments in baby food which are not substitutable with each others and
therefore should be considered as distinct product markets. These markets are baby
meals, baby snacks, and baby drinks. The question whether baby cereals constitute a
separate market was left open in this decision.
25. Baby meals designate prepared meals and individual ingredients for meal preparation,
labelled and marketed for babies and children from 6 months up to 36 months. They
include mashed purées with a combination of vegetables and meat or fish, single food
purees, fruit compotes, soups and ambient dairy products. The parties submit that all
baby meals form part of the same market since parents purchase different categories of
8 Form CO, page 34.
6
meals in order to provide a balanced diet to the baby. Moreover all manufacturers offer a
large range of products.
26. Within baby meals, a distinction could be made between savoury meals (vegetable, fish,
poultry, meat, soup) and sweet meals (compote, yogurt, ambient dairy products) as
babies' diet should balance savoury and sweet products for nutrition and taste
development purposes. For the purposes of the present case, it can be left open whether
distinct product market for sweet and savoury meals should be defined.
27. Baby snacks refer to all sweet and savoury snacks intended for babies and toddlers from
4 to 36 months and include biscuit, crackers, cereals bars and fruit bars.
28. The parties submit that baby cereals include cereals for feeding infants or toddlers in dry
or liquid format. Baby cereals are typically composed of rice semolina, wheat flour or
oats. According to the parties, it is possible to distinguish dry cereals (requiring addition
of water or milk) from liquid cereals which are ready-to-drink dairy based products with
cereals (typically milk with cereals).
29. Finally, baby drinks refer to all drinks other than milk-based drinks intended for babies
and children, including juices, syrups and herbal teas. They are available in three
product forms: ready-to drink, concentrates and dry granules, which are reconstituted
with the addition of water.
30. The market investigation has globally confirmed the existence of the above-mentioned
product markets. The classification of liquid cereals which are sold by Danone under the
Bledilac brand is however unclear. The majority of market participants, especially
customers, view Bledilac as a substitute for baby milk (primarily GUM since [60-70] %
of Bledilac consumption is made by babies aged at least one year9) and therefore include
this brand in the GUM segment. Although the parties disagree with this approach, it
appears from internal documents submitted by Danone that […] 10 .
31. For the above reasons, the Commission will assess the impact of the transaction on the
following product markets: i) baby meals, ii) baby dry cereals (without liquid cereals
which will be included in the GUM market), iii) baby snacks and iv) baby drinks.
Branded product vs. private label products
32. In line with the Commission's previous practice11 in consumer goods products, the
Commission considers that there are separate markets for the supply of branded baby
milk and baby food products to retailers (and pharmacies) and the supply of private label
baby food and baby milk products to retailers (products which are marketed under
retailer's brands). Accordingly, some suppliers of branded products also provide private
label products to retailers and the procurement processes between branded and private
labels products is different (bilateral negotiations for the former and tenders for the
latter). Although it is clear that when private label products are available, branded and
9 Answer from the parties to the Commission's request for information dated 4 October 2007.
10 See […].
11 See Cases COMP/M.4533 SCA/P&G, and M.4761 Bongrain/Sodiaal/JV.
7
private label products compete at retail level (i.e. on the supermarkets' shelves), this is
not the case at the wholesale level.
33. As the parties do not supply private label products, the competitive assessment will
focus on the branded markets. Nevertheless, the competitive interaction at the
downstream retail level (i.e. on supermarkets' shelves) between "manufacturer/branded
products" and "retailer/private labels" will be taken into account in the analysis, even if
private labels have so far little influence on the baby food markets.
Relevant geographic markets
34. In accordance with past Commission practice regarding the sale of food products to
retail chains, and particularly the Nestlé/Gerber decision, the notifying party submits
that the relevant geographic markets for each of the products described above is national
in scope.
35. The parties point out that national consumption patterns for food fed to babies vary
across EU countries, the distribution of baby food products is generally organized on a
national basis, the relative weight of the distribution channels (in particular the
breakdown of sales between pharmacies and retail chains) may differ significantly
according to the countries, market presence of baby food players and brands under
which these products are sold vary among Member States and finally the prices of baby
food or milk show significant discrepancies from a Member State to an other12. The
market investigation has widely confirmed the existence of national features which point
to the existence of national markets (e.g. procurement at national level, price differences
among Member States, existence of national brands, differences between countries as
regards consumption level and market growth).
36. As regards baby milk and particularly IFFO, although the caloric and nutrient needs of
babies are similar across countries, consumption and sales growth depend directly of
national features such as birth rate and breast feeding habits. For example in France, the
birth rate is one of the highest in Europe (13 per 1000 inhabitants whereas the rate in
Germany is around 8.5) but the breast feeding rate is one of the lowest (58% of French
mothers breast-feed their babies, whereas this rate is more than 80% in Germany and
above 90% in Scandinavian countries). IFFO formulations may also be different across
Member States in order to meet national consumption habits or paediatricians' advices.
The same is true for GUM which shows significant differences of saturation level and
growth rates among Member States.
37. On the basis of the above considerations, the Commission takes the view that the
different markets for branded baby food and baby milk products have a national
geographic dimension.
12 The parties submit that for IFFO, the average Community price was approximately €13 per kg in 2006.
Countries like Greece and Italy offer relatively high average prices (respectively €17 and €28) whereas
the average prices in the Netherlands and Germany are respectively €9 and €10..
8
Competitive assessment
38. Danone's geographic focus in baby food and baby milk is in France where its subsidiary
Bledina achieves [80-90] % of its turnover. The activities of the parties overlap to a
significant extent in France, Belgium, the Netherlands and Portugal. In the United
Kingdom, Danone is only active in baby meals with a market share below [0-5] % (both
for sweet and savoury meals). Hence the UK market will not be further discussed below.
1. France
39. The table below provides a summary of the parties' and their competitors' market shares
based on value in France in 2006 in all the affected markets13.
IFFO milk
40. The table show that the transaction would create a market leader in the French market
for IFFO milk with a market share of [45-55] % far from its next competitor Nestlé with
[25-35] % market share. Other smaller competitors include the Spanish company Ordesa,
which is active in France through its subsidiary Sodilac and markets its product under the
brand Modilac both in retails outlets and in pharmacies; Mead Johnson, a division of the US
pharmaceutical company Bristol-Myers Squibb that sells its products under the brand
Enfamil exclusively in pharmacies ([5-10] % market share); United Pharmaceuticals, a
French company which is only active in the pharmacy channel through its brand Novalac
([5-10] % market share). The market shares submitted by the parties have broadly been
confirmed by the data collected from the other market players during the market
investigation.
41. The market positions would not significantly change on the basis of narrower product
market definitions. If a distinction was made between infant and follow-on milk, the
parties would hold a market share of [45-55] % in infant milk, the next competitor being
Nestlé with [25-35] % and [45-55] % in follow-on milk (Nestlé [30-40] %). Likewise,
the new entity would also become market leader if separate markets where found
according to the distribution channel: in the retail channel, the combined market share
would be [45-55] % (Nestlé [35-45] %) and [40-50] % in the pharmacy channel, far
beyond the next competitor Novalac with [15-25] %. However the new entity would
13 Source: Nielsen
Market Danone Numico
Combined Market
Share Competitor 1 Competitor 2
Market Size
(MEUR)
IFFO
milk
[30-40]
%
[15-25]
%
[45-55] % [25-35] %
(Nestlé)
[5-10] % (Ordesa) [390-410]
GUM
[25-35]
%
[5-10] %
[35-45] % [20-30] %
(Sodiaal)
[20-30] %
(Lactalis)
[130-150]
Baby
drinks
[40-50]
%
[10-20]
%
[50-60] % [40-50] %
(Nestlé)
[0-5] % (Hipp)- [10-20]
9
have a higher combined market share on the therapeutic milk market ([50-60] %) as
Nestlé is a weaker competitor in this segment ([5-10] %).
42. Respondents to the market investigation indicated that the market structure that would
result from the concentration would bring about competition concerns, especially in the
retail channel. Indeed, these markets are subject to strong regulatory and quality
requirements, and the brand/company image among consumers as well as
paediatricians/hospitals prescribing IFFO milk, plays a significant role. Thus,
entry/expansion on these markets is a complex task. Respondents to the market
investigation indicated that a key factor of success in the IFFO market is to establish
brand awareness and credibility among healthcare professionals and prescribers of IFFO
products (maternities, general practitioners, paediatricians) which require significant
investment in time and money. Customers in the retail channel also unanimously
confirmed that brand was a very important criterion for their purchases of IFFO milk.
43. After the transaction, the new entity would hold four of the major brands in IFFO milk
in France (Bledina and Gallia from Danone; Nutricia and Milupa from Numico). With
one exception, all the retailers responding in the market investigation have confirmed
that Danone's IFFO milk brands are "must-have" brands in the French market and a
majority of these retailers indicated that Nutricia and Milupa are must-have brands as
well.
44. The market investigation highlighted that retailers usually sell a limited number of
brands. In general, no more than seven brands are exposed on the retailers' shelves in
France, namely Bledina and Gallia (Danone), Nidal and Guigoz (Nestlé), Milupa and
Nutricia (Numico) and Ordesa's brand Modilac. Likewise for other consumers' goods
products, the way IFFO milk is exposed on the shelves greatly influences consumers'
choices. During the investigation, the Commission gathered information as regards the
significant role of Danone and Nestlé in so-called "category management" for IFFO
milk shelves in France, which allows suppliers to have a more significant weight on the
placement of products on the shelves and thereby have an influence on the endconsumers'
purchasing decisions. Numico has fiercely competed with Danone and
Nestlé to be responsible for management of the shelves. It has managed to introduce in
some retailers' outlets new "plan-o-grams" on how to assort products on the shelves (all
the brands on the same row) in order to enable consumers to compare prices more
easily.
45. The importance of brands in the IFFO milk market is further confirmed by the fact that
there is no private label IFFO competing with branded IFFO in France for two main
reasons. First, as noted above, IFFO milk is a product for which access to practitioners is
crucial and retailers do not promote these products towards the medical community.
Second, as non specialist, retailers have to resort to third-party production and cannot
control the stringent quality requirements associated with IFFO products, while still
incurring the risk of quality problems with disastrous effects on the retailers' image.
46. The parties submitted that Danone and Numico are not close competitors in the French
market for IFFO milk in view of the different formulations of their products and price
positioning. First, the market investigation did not yield that consumers view Danone
and Numico's IFFO milk as really different in terms of ingredients or formulations.
Indeed, customer benefits claimed by these suppliers appear to be rather similar.
10
Numico uses probiotic ingredients of the "FOS-GOS"14 type, which helps to improve the
child's immunity while Danone uses a fermentation process which leads to consumer
benefit such as "strengthening natural defences". Second, while it is true that most of the
retailers having answered to the market investigation view Nestlé's brands as close
competitors of Danone's brands, they also unanimously confirmed that the best
alternative for Numico IFFO milk are Danone's products15.
47. As regards the price positioning, the market investigation revealed that Nutricia's
standard baby milk offering is characterized indeed by its low price positioning. This is
not the case for the Milupa brand, which is priced at the same level as the Danone's and
Nestlé's milk. On average, and according to the parties' submission, Nutricia is priced
[10-20] % below the average price of IFFO milk. Some customers indicated that the
price gap between Nutricia and its competitors was as high as [25-35] %. Nutricia
mainly competes on prices to make up for its weaker brand image compared to Danone's
and Nestlé's brands.
48. A majority of customers has expressed the concerns that this low-pricing challenger
strategy would not be carried out by Danone after the implementation of the transaction
which would ultimately give rise to price increases on IFFO products in France. Some
customers have explained that the transaction would significantly undermine their
negotiation positions, as Numico is currently a credible alternative to Danone and Nestlé
with a mid-priced brand (Milupa) and a low-priced brand (Nutricia). They indicated that
there is a risk that given Numico's current role on the market, Danone would have a
strong incentive to remove Numico's brands altogether from the market.
49. While market shares are similar in the pharmacy channel, market shares of the parties
and their competitors have been less stable in the last years than in the retail channel
with the entry and expansion of specific players (Ordesa, Lactalis/Picot, United
Pharmaceuticals, and Mead Johnson) in this channel. In the parties’ view this is due to
apparently lower barriers to entry, as pharmacists can sell any equivalent to the product
desired by customers. Consequently, rather than relying on their brand image,
competitors in the pharmacy channel rely on the quality of their products, as well as
their ability to make pharmacists achieve higher margins. However, given the current
market structure, serious doubts cannot be excluded on the market for IFFO sold to
pharmacists. The commitments submitted by Danone in any case cover also this channel
(as discussed below).
50. Given the high market shares of the new entity, the fact that Danone/Numico would own
a high number of must-have brands, the removal of a strong competitive constraint on
prices and high barriers to entry in the retail channel, the Commission considers that the
transaction may significantly impede effective competition on the French market for
IFFO milk. Therefore, the proposed transaction raises serious doubts as to its
compatibility with the common market and the EEA agreement.
GUM
14 Fructo Oligosaccahrides and Galacto-Oligosaccharides
15 Answer to question 18 in questionnaire sent by the Commission to customers on 20.09.2007
11
51. As regards GUM, the transaction would allow Danone to strengthen its leading position
in the French market with a market share of [35-45] %. Competitors include dairy
products suppliers Sodiaal ([20-30] %), Lactalis ([20-30]%) and baby food suppliers like
Nestlé ([15-25]%) as well as smaller players such as Novalac and Picot.
52. A majority of customers and competitors did not express concerns as regard the French
GUM market. Indeed, the market investigation revealed that the GUM market shows a
significant degree of competition with high promotional activities and a slight decrease
in average prices in the last 12 months. Market structure is also different from IFFO to
the extent that dairy products manufacturers (Lactalis, Sodiaal) are active in this market
with significant market shares. This is due to the fact that contrary to IFFO products
which arte almost exclusively in powder format, the liquid format is widespread in the
French GUM market and these companies have the know-how and industrial
capabilities to develop liquid products.
53. In the light of the above, the transaction does not raise serious doubts as to its
compatibility with the common market as regards the French GUM market.
Baby drinks
54. On the French baby drinks market, the proposed merger leads to a reduction of the
number of suppliers from 3 to 2 and would create a new leader with a market share of
[50-60]%. Apart from Nestlé which would hold a market share of [40-50] %, there is
just one competitor, the German company Hipp with [0-5] % market share.
55. The parties explained that their market share is not meaningful since baby drinks is the
category which is the more exposed to competition from regular products (the French
baby drinks market is declining). Moreover, the parties claimed that Danone and
Numico do not appear to be direct competitors since Danone only sells fruit juices and
Numico sells herbal teas (dehydrated infusions derived from aromatic plants and packed
in individual tea bags).
56. However, customers questioned during the market investigation view fruit juices
produced by Danone and herbal teas manufactured by Numico as direct competitors in
the French baby drinks market since they explained that consumers purchase one or the
other product (as well as fruit juices offered by Nestlé) when they intend to buy baby
drinks. Consumers make their selections between different flavours available among
fruit juices and herbal teas rather than choosing a specific baby drink product.
57. As regards competition from regular drinks, the market investigation has not been
conclusive as to its impact on the French baby drink market. The fact that the baby drink
market has declined between 2004 and 2006 does not per se prove that customers are
switching to regular drinks. Actually, baby drink is a seasonal product which is mainly
purchased in summer and the level of sales of baby drinks is highly dependent on
summer weather conditions. At this stage of the proceedings, the Commission is not in
the position to assess whether this competitive pressure would render a price increase
from the merged entity unprofitable in view of the duopolistic structure of the French
baby drinks market.
58. Inview of the competition concerns identified on the French market for baby drinks, the
Commission has serious doubts as to the compatibility of the proposed concentration
with the common market.
12
Baby meals, snacks and cereals
59. With regard to French baby food markets (baby meals, snacks and cereals), one
competitor stressed that the transaction will impair potential entry into these markets.
According to this competitor, Numico is well established baby food competitor in
neighbouring countries (Belgium) and enjoys in this country a strong position with
products well suited to the French market. However, Numico makes no sales of baby
meals, snacks or cereals in France.
60. However, the Commission did not find evidence supporting this submission. First as
regards baby cereals, Numico has tried to enter the market […]. Numico was eventually
forced to exit the market. As regards baby meals, the range of Numico's baby food
products is essentially made of jars whereas in France retailers require their suppliers to
provide more convenient formats such as plates and plastic bowls (which are supplied
by Bledina inter alia). With regard to baby snacks, Numico has not tried to enter in view
of the limited size of the segment […].
61. Therfore, no competition concerns are identified at the French baby food markets (baby
meals, snacks and cereals).
2. Belgium.
62. The market structure and size in 2006 are outlined below. Danone's Bledina products are
sold through a distributor (PAB) and makes some other sales (Gervais, Lu) directly.
Numico is directly active in Belgium.
Baby meals
63. Baby meals is the market with the most significant overlap and the merger would
strengthen the position of the current leading supplier Numico ([40-50] %) with a
market share of [75-85] % far beyond its nearest competitor Nestlé ([15-25] %). The
parties submit that no competition concerns arise since Nestlé is a strong and growing
rival, and Numico and Danone are not close competitors in view of their positioning
(Danone and Numico would respectively be strong in Wallonia and Flanders) and
different packaging.
Market
Combined
Market
Share
Overlap Competitor 1 Competitor 2
Market
Size
(MEUR)
Baby GUM [60-70] %
[5-15] %
(Danone)
[20-30] %
(Nestlé)
[10-20] % (others) [20-30]
Baby Meals [75-85] %
[35-45] %
(Danone)
[15-25] %
(Nestlé)
[5-10] % (Hipp) [25-35]
Baby Snacks [90-100] %
[5-15] %
(Numico)
[0-5] % (others) - [5-15]
Baby
DryCereals
[15-25] %
[0-5] %
(Danone)
[80-90] %
(Nestlé)
- [0-10]
Baby drinks [90-100] %
[5-10] %
(Danone)
[5-10] % (Hipp) - [0-10]
13
64. These claims were not supported by the market investigation. Respondents indicated
that Numico and Danone are the closest substitutes in this market and are engaged in
face to face competition: retailers play Numico and Danone against each other to keep
prices down. Furthermore, it appears that Danone and Numico compete in innovation
(introduction of new products), range of products, and of course quality and prices to the
benefit of consumers and are heavily advertising their products. Besides these two
players, Nestlé's position, while growing, is not comparable to that of the parties,
whereas a player such as Hipp has a specific positioning on organic/premium products,
and is therefore not exerting a strong constraint either on the parties.
65. Nestlé, Hipp or another market player wishing to expand/enter the market would
probably experience the utmost difficulties. Being active on this market requires
reaching a critical size, given that a supplier has to preferably provide not only sweet
and savoury meals but also products for each day of the week and all baby-age brackets
(8-12 months, 12-16 months, 16-20 months). Furthermore, suppliers have to cope with
the limited shelf space ascribed to baby food products and retailers do not sell products
from suppliers with less than 25-30 Stock Keeping Units in order to maintain a high
rotation rate. In view of this and of the importance of establishing brand awareness in
these markets, expansion/entry on the baby meal markets is complex.
66. This expansion is all the more difficult, since it has been brought to the attention of the
Commission that some category captainship arrangements, under which the leading
market players provides recommendations on which brands to shelve, on how to display
each product and with which space allocation, etc also exists in the Belgian market in a
similar way to the French market for IFFO milk. These recommendations can be
provided by more than one player, and, typically, on the Belgian market, category
captains are Numico and Danone. This recommendation is supposed to be based on the
supplier expertise on the market, and while retailers are free not to follow them, they
have an incentive to do so, as they are supposed to maximize their profits. Under these
circumstances, entry or expansion on those markets are difficult, as leading market
players' influence on which products to shelve and how they should be displayed, often
means that their products will benefit from more space and a better display than
competitors' products.
67. This overall analysis is not changed if a distinction is made between savoury and sweet
meals, since the market positions of the parties are similar for sweet meals (Danone:
[40-50] %, Numico : [40-50] %) and savoury meals (Danone : [25-35] %, Numico : [35-
45] %).
68. In the light of the above, the Commission has serious doubts that the proposed
concentration would significantly impede effective competition on the Belgium market
for baby meals.
14
GUM and baby drinks
69. For the same reasons as for baby meals, the parties contend that, despite their high
market share on the GUM market ([60-70] % with an overlap of [5-15] %), the effects of
the transaction on competition would remain limited.16
70. While it is true that fewer concerns were expressed for GUM and baby drinks than for
the effects on the baby meal market, it was pointed out to the Commission that Blédilac
(mix of milk and cereal) is one major product of the current Danone's range, which
should be included in the GUM market since it is overwhelmingly considered by
Belgian retailers as a substitute for GUM. Thus, as confirmed by the market
investigation, Danone animates the market for GUM, and its removal would be
detrimental to competition. The proposed concentration therefore raises competition
concerns on the Belgian market for GUM products.
71. As regards baby drinks, although market shares would be very high, the parties submit
that the effects of the transaction would be limited in particular in view of the high
degree of substitution with regular drinks. Nevertheless, while no strong concerns were
expressed about the effects of the proposed concentration on this market—perhaps due
to its limited size—the first-phase investigation does not allow to decisively conclude
that suppliers of baby drinks would not be able to increase prices due to regular drinks.
Thus, given the new entity's very high market share, and the closeness of substitution
between the products of the two parties on this market (in Belgium, Numico's portfolio
of products include juices), competition concerns cannot be excluded on the Belgium
markets for GUM and baby drinks. The proposed concentration therefore raises
competition concerns on the Belgian market for baby drinks.
Baby snacks
72. For baby snacks, Danone is active in Belgium through three brands: Blédiscuit ([10-20]
% market share), Betterfood ([40-50] %) and LU Vitabis ([25-35] %). The parties
indicate that Danone is currently under exclusive discussions for the sale to Kraft Foods
of its biscuit business, including LU Vitabis17. However, for the purpose of the present
case and given that the sale (presumably to Kraft as part of the Kraft-Danone transaction
(M.4824)) of Betterfood and Lu Vitabis is not yet finalized, competition concerns can be
identified on the market for baby snacks in Belgium. This is therefore subject to a
remedy submitted by Danone by virtue of which Danone commits to sell the two brands.
This would leave Danone with a [5-15] % market share, thereby removing competition
concerns.
16 The sales include Bledilac sales in Belgium in 2006. Bledilac is a mix of milk and cereals, which sales
were […] million euros in 2006, approximately [0-10] % of the total GUM market
17 The transaction has been notified to the Commission on 12 september 2007 M. 4824 Kraft/Danone Biscuits
15
Conclusion
73. In view of the competition concerns identified on the Belgian markets for baby meals,
GUM, baby drinks, and baby snacks,, the proposed concentration raises serious doubts
as to its compatibility with the common market
3. Netherlands
74. The affected markets are described in the table below. As in Belgium, Danone products
are sold through its distributor PAB18.
Market
Combined
Market
Share
Overlap Competitor 1 Competitor 2
Market
Size
(MEUR)
Baby Meals [85-95] % [0-5] % (Danone) [5-10] % (Nestlé) [0-5] % (Other) [50-60]
Baby Snacks [65-75] %
[15-25] %
(Numico)
[15-25] %
(Bolletje) [10-20] % (Nestlé [5-15]
Baby dry cereals [80-90] % [0-5] % (Danone)
[5-10] %
(Lyempf) [5-15] % (Sugro) [5-15]
Baby meals
75. As follows from the table above, Numico dominates the Dutch baby meals market and
this observation holds true if a distinction is made between sweet meals (Danone: [0-5]
%, Numico: [70-80] %) and savoury meals (Danone : [0-5] %, Numico : [85-95] %).
76. While it is true that Danone is a weak actor on this market, this is also the case for
Nestlé Thus, under these market conditions, the removal of competition, how weak it
may be, could be detrimental. This is all the more true as the market investigation
showed that some retailers started in the past to purchase products from Danone to be
less dependent on Numico.
Baby snacks
77. As regards snacks, Danone is almost exclusively active through its brand LU Liga,
which should be divested to Kraft as part of the Kraft/Danone Biscuits transaction.
Thus, the same question arises as for the Belgian market for baby snacks and
competition concerns cannot be excluded.
18 The overlaps in GUM (Danone [0-5] %) and in baby cereals (Danone [0-5] %) are minimal.
16
Conclusion
78. In view of the competition concerns identified on the Dutch market for baby meals and
snacks19, the proposed concentration raises serious doubts as to its compatibility with
the common market.
4. Portugal
79. In Portugal, the parties' activities overlap in baby meals, baby cereals and baby drinks.
The affected markets are as follows:
80. As regards baby cereals, Nestlé is the clear market leader and the transaction does not
raise competition concerns.
81. As regards baby meals20 the market share of the new entity would remain below [45-55]
% and the consolidation of the market did not raise concerns among respondents to the
market investigation. Quite to the contrary, some retailers welcomed the merger on the
ground that the combination of Danone and Numico product range would create a good
alternative to Nestlé. Indeed, it was confirmed that Danone and Numico were not closest
competitors on the market, and that they were used by retailers as an alternative to
Nestlé rather than an alternative to each other. Numico is not the closest competitor to
Danone since it is only active in sweet meals whereas Danone's and Nestlé's products
cover the entire baby meal range. These results suggest that non-coordinated effects as a
result of the merger are unlikely to arise.
82. As regards baby drinks, the combined entity would not reach as high market shares as in
France and Belgium. It should also be stressed, that baby drinks are even more underdeveloped
than in France and Belgium, and the market size is limited to EUR [0-5]
million, which suggests that the competitive pressure stemming from regular drinks
might be even stronger in Portugal. Furthermore, Danone and Numico are not closest
19 Baby dry cereals do not give rise to competition concerns given the marginal sales made by Danone on
this market.
20 There is no overlap in savoury baby meals. In sweet baby meals, the new entity would hold a market
share of [40-50] % (Nestlé: [50-60] %).
Market
Combined
Market
Share
Overlap Competitor 1 Competitor 2
Market
Size
(MEUR)
Baby meals [45-55] %
[5-10] %
(Numico)
[45-55] %
(Nestlé)
[0-5] % (Hero) [15-25]
Baby dry
cereals
[20-30] %
[0-5] %
(Danone)
[70-80] %
(Nestlé)
[25-35]
Baby drinks [40-50] %
[15-25] %
(Danone)
[50-60] %
(Nestlé)
[0-5] % (Hero)- [0-5]
17
competitors, as they are endeavouring to dispute Nestlé's position on the market. In view
of these elements, non-coordinated effects as a result of the merger are unlikely.
83. Given the competitive pressure stemming from regular drinks, and the inherent
difficulty to come to a common understanding on the terms of a tacit coordination on a
consumer good market (range and quality of products, and introduction of new products
differ across companies), coordinated effects as a result of the merger do not seem likely
despite symmetry of market shares after the proposed concentration. The same is true
for baby meals where suppliers need to have a broad product range in order to be
successful, which renders difficult to reach adequate terms of coordination between
market players. This is all the more true as innovation and the introduction of new
products is a key factor of competition on this market.
84. Thus, the Commission takes the view that the proposed concentration does not impede
effective competition on the Portuguese markets for baby meals, cereals, and drinks.
V. COMMITMENTS SUBMITTED BY THE NOTIFYING PARTY
(a) Procedure
85. In order to render the concentration compatible with the common market, the notifying
party has offered some commitments pursuant to Article 6(2) of the EC Merger
Regulation, which are annexed to this Decision. The initial commitment package was
proposed by Danone on September 24, 2007, however due to limited scope of this
package the Commission requested several improvements. The improved commitment
package was proposed by Danone on October 10, 2007. After examination and market
testing of this commitment package, a final commitment package was submitted by
Danone on October 30, 2007. The final commitments were deemed suitable to remedy
the competition concerns identified. These commitments are attached to this decision
and form an integral part thereof.
(b) Description of the commitments
France
86. With respect to baby-milk in France, the divestment package in France would in
particular comprise the following:
- the assignment of the Lemiel and Milumel and Milumel AR (therapeutic IFFO)
brands;
- an exclusive 5-year license on the following brands: Nutricia and Milupa and the
related sub-brands (, Nutricia Confort, Nutricia Soja, Pepti Junior, Nutrilon AR,
Nutricia Croissance, Nutricia Kid, HN 25, GES 45, Pregomine, Milupa Digest,
Milupa Conformil, Milupa HA and Milupa prema) followed by a commitment not to
reintroduce the licensed brands in France for a period of 5 years after the termination
of the 5-year license agreement (black-out period). These products should be rebranded
by the purchaser during the licensing period.
- A 5-year license for the use in France of all patents related to the IFFO and GUM
products covered by the licensed brands.
18
- a 5-year exclusive license on know-how relating to recipes, formulations,
manufacturing processes, and access to the R&D work that is in progress to support
the new product launches planned in France within 2 years from closing21.
- at the option of the purchaser, Numico's IFFO and GUM milk production facility
in […], or alternatively a 3-year at cost supply agreement for the production of the
products covered by the licensed products, with Danone committing to reserve
sufficient production capacities or making its best efforts to transfer the benefits of
existing third-party arrangements with co-manufacturers.
- Numico personnel in France, in particular the sales force in charge of promoting
products among paediatricians and maternities, as well as of the sales to retailers.
- All the tangible assets, contracts, customer orders, customer records and personnel
in relation with Numico's IFFO and GUM milk businesses in France.
- at the option of the purchaser, the provision of manufacturing technical assistance
for 12 months.
- at the option of the purchaser, a licence’s to Numico’s technology for the new
“Eazypack” packaging for powder IFFO.
87. With respect to baby-drinks, the package would include the brand Babysoif brand and
all current product recipes (formulations, etc.) with a 3-year supply agreement and at the
option of the purchaser, the provision of manufacturing technical assistance for 3 years.
Belgium
88. In Belgium, the divestment package would in particular comprise the following:
1/. Baby meals:
- a 5-year exclusive license on the following brands: Pots Bledina, Bledichef,
Les Idées de Maman, Compotines Blédina, Pots Fruits Blédina, Pots desserts
Blédina Bledisoup, Bledimilky/Petit Bledi and Repas du Soir (only the authorization
to use the last product as it is not a registered trademark) . This licence would be
followed by a 5-year commitment not to reintroduce the divested brands in Belgium
(black-out period). Danone furthermore commits not to use the prefix “Blédi” in
relation to any product sold by it in Belgium and the Netherlands during the license
period and the “blackout” period defined above, except for a transitional period of
up to 12 months necessary for the products not covered by the Licensed Baby Meal
Brands (Les Petits Grands) to be re-branded to other (e.g., Numico) brands in
Belgium
- Transfer of the existing production contract with third party/ies
- a 3-year "at cost" supply agreement for the production of the products
covered by the licenses(optional)
21 After the expiry of the licensing period, Danone commits to grant the purchaser a non-exclusive license
for the recipes and formulations on an arm's length basis at the request of the purchaser.
19
- a 3-year- manufacturing technical assistance - a transfer of Bledina's
distribution agreement in Belgium (optional)
- a license to Bledina's […] technology for the manufacture of […] (optional)
2/. GUM
- the assignment of the brand 1-2-3 (with recipes, formulations etc.) and a 5year
license on the brand Gervais for use solely in Belgium in relation to GUM.
- Danone's contract with its current supplier of GUM 1-2-3
- a 5-year license for Bledilait and Bledilac (see schedule 4 of the attached
commitments), followed by a 5-year black-out period including recipes and
formulation as well as a 3-year at cost supply agreement. The same black-out period
will follow the 5-year license on the Gervais brand.
3/. Baby drink
- the authorization to use the Minibiberon designation in Belgium for five
years, followed by a 5-year black-out period and all current product recipes,
formulations, including a 3-year "at cost" supply agreement for the production of the
products covered and at the option of the purchaser a 3-year manufacturing technical
assistance etc.
4/. Baby snack
- The assignment of the brands Betterfoodand Lu Vitabis.
Netherlands
89. In the Netherlands, the divestment package would in particular comprise the following:
1/. Baby meals:
- a 5-year exclusive license on the following brands: Pots Bledina,
Bledichef, Idées de Maman, Repas du Soir22, Compotines Blédina, Pots Fruits
Blédina, Pots desserts Blédina, Bledisoup, Bledimilky/Petit Bledi. This would not
include the brand Les Petits Grands that would be kept by the new entity. The 5year
license would be followed by a 5-year commitment not to reintroduce the
divested brands in the Netherlands (black-out period). Danone furthermore commits
not to use the prefix “Blédi” in relation to any product sold by it in Belgium and the
Netherlands during the license period and the “blackout” period defined above,
except for a transitional period of up to 12 months necessary for the products not
covered by the Licensed Baby Meal Brands (Les Petits Grands) to be re-branded to
other (e.g., Numico) brands in Belgium
22 Only the authorization to use this product as it is not a registered trademark.
20
- the transfer of Bledina's distribution contract with its distributor PAB for
the Netherlands (optional for the purchaser)
- a 3-year at cost supply agreement for the products covered by the licensed
brands
- a license to Bledina's […] technology for the manufacture of […] (optional)
2/. Baby snacks:
- the assignment of the brand Lu Liga
(c) Suitability for removing the serious doubts
France
IFFO milk
90. As regards IFFO milk (including therapeutic milks) in France, the divested and licensed
brands would completely remove the overlap. Indeed, Numico uses today the two
brands Nutricia ([10-20]% market share in 2006) and Milupa ([0-5] % market share) to
market its IFFO milk products in France. Lemiel is used as a sub-brand to Nutricia,
whereas Milumel was the brand replaced recently by the brand Milupa.
91. The acquirer will be the Milupa and Nutricia licensee of the new entity for 5 years.
According to the market test, and while the details of the licensing agreements between
Danone and the acquirer (e.g. provisions on the change of brands, resolutions of
disputes23, etc.) would be critical, this duration appears sufficient to allow the acquirer
to re-brand the products with its own brands. It can however not be shorter—as claimed
by the parties—as brands play an extremely important role on this market and rebranding
implies massive education and marketing efforts. It is clear from the
commitments that the acquirer of the divested business will be able to use the acquired
brands to launch its re-branding. It can rely especially on Lemiel. Indeed, while the
divested brand Lemiel has been used since 2006 as a sub-brand to Numico’s main brand
Nutricia, it appears to continue to enjoy a very strong brand awareness rooted in
historical presence on the French market. It represents approximately [30-40]% of the
Nutricia sales in France, and those consumers who buy Lemiel products would be more
loyal to Lemiel than to Nutricia.
92. According to the information collected by the Commission, the relevance of splitting the
brands between two different acquirers appears doubtful with respect to restoring
effective competition. Indeed, Milupa achieves today a small market share ([0-5] %),
especially among retailers, apparently due to a recent re-branding from Milumel to
Milupa. Separating Milupa from Nutricia could strike a fatal blow to Milupa, as the
acquirer of the Milupa brand would not achieve enough sales to retain the interest of
23 Such disputes may arise due to the fact that Danone will continue to use the Nutricia brand for other
products.
21
retailers. Thus, it appears highly preferable that, to restore pre-merger competition
conditions, the acquirer acquires the overall divested package in the IFFO milk.
93. The brands introduced by the acquirer will also not face the re-introduction of the
Milupa and Nuticia brands after the expiration of the licenses for five years, which
provides enough time to the acquirer to build brands' equity.
94. As regards production facilities, interested acquirers will have the possibility to
purchase Numico’s plant in […]. Should it be the case, such acquirer would be able to
manufacture the products marketed in France. As the plant has considerable capacity,
the acquirer would have to supply to Danone products for the marketing of these
Numico products outside of France. This solution would have the merit to enable the
purchaser to control its cost structure. This is all the more important, as Numico's
Nutricia is priced at a lower level than competing brands, and cost of manufacturing is
therefore critical. Second, the new entity would be able to introduce innovations and
new products on the market without delay. Third, the inherent difficulties of the cost
monitoring of supply-agreements would be avoided.
95. Alternatively, if the buyer is of the view that no production facility is needed as it could
use or expand its own capacity or find alternative sources, it could opt for a supply
agreement. This supply agreement would enable the buyer to manage the transition
period during which the manufacturing of Milupa and Nutricia products would be
transferred from the current Numico's production lines to its own. According to the
market investigation, this transition could last up to three years (and the duration of the
supply agreement offered by Danone is set accordingly). Thus, given that, under this
arrangement, the supply agreement could be in force during much more than a couple of
months, it will have to work effectively so as to ensure that competition conditions postmerger
are comparable to those conditions pre-merger. These conditions are all the more
sensitive as the purchaser would be supplied by the leading market player in France.
96. According to the market test, and even if one competitor explained that such supply
agreement would not be satisfactory, this arrangement would be feasible under some
conditions. Indeed, among those competitors that believe such supply agreement could
work in a satisfactory fashion, one of them explains that "the supply agreement to be
entered between Danone and the acquirer would need to guarantee that the acquirer
generates a sufficiently high gross margin to finance a high level of advertising and
promotion costs. High promotion is a must if the business is to survive and generate a
satisfactory return for the acquirer."24 This is confirmed by another competitor. Another
competitor points out that costs are difficult to monitor and, to ensure that competition is
restored, costs other than manufacturing costs should be taken into account: "The supply
agreement should make sure that the acquirer will benefit from all economies of scale
including supply of raw material. Other elements (such as transport costs, packaging,
general administration and marketing) play a role in the ability of the acquirer to
maintain the pricing policy. Monitoring these factors is difficult due to the lack of
transparency. It is necessary to bring in a third party to ensure the acquirer will benefit
from economies of scale".25 In this respect, the attached commitments provide that the
monitoring trustee will have the responsibility to review such supply agreement.
24 Response to market test sent to competitors, question 2
25 Ibidem
22
97. As regards innovations not included in the current product pipeline of Numico for the
next two years, confidentiality issues (innovations designed by the acquirer must not be
communicated to Danone) implies that the acquirer would be able to design and produce
such innovations on its own.
98. In any case, should the acquirer not wish to buy Numico's plant, it would also have
access to the Numico's Eazypack packaging technology through a license and also to the
FOS/GOS (oligosaccharides) formulation. These two latter points are essential to the
remedy package given that the Eazypack technology is currently being introduced on
French shelves. As for the FOS/GOS formulation, it was reported to the Commission
that the formulation of the products based on the FOS/GOS recipe had clinically proven
beneficial effects and are marketed as such to paediatricians and maternities.
99. Furthermore, the acquirer would also have access to the recent and current fruits of
Numico's research and development and have access to Numico's innovation for the next
two years. The personnel of Numico France dedicated to the baby-food business, and in
particular the sales force in charge of marketing the products to professionals
(paediatricians) and to retailers, is also part of the package. This is all the more crucial
as the acquirer of the divested business will need to explain to professionals the change
of brands so that the latter don't change their recommendations.
100. Given the design of the remedy package, respondents unanimously explained that
the acquirer should be a company already active in the IFFO/GUM business or, at least,
a dairy company. The Commission notes that such companies have expressed interest
for acquiring the divested business, which suggests the good degree of viability of the
package.
101. In conclusion, provided the final purchaser meets the requirements explained above,
the attached commitments remedy the serious doubt expressed on the French market for
IFFO milk.
Baby-drinks
102. While the baby-drink business of Numico in France is modest, a similar conclusion
can be reached for the commitment made by Danone in this respect. The overlap would
be removed in its entirety and, in view of the result of the market test, competition
concerns would no longer exist. As regards viability, an interested purchaser expressed
the view that the licensing and black out periods should be long enough to enable the rebranding,
and this observation is addressed in the amended commitments offered by
Danone.
Belgium
103. Danone offered a revised package to address competition concerns identified on the
baby meal, baby GUM, and baby drink markets in Belgium. In addition, given that the
Kraft-Danone transaction is not yet closed, a "technical" remedy with respect to baby
snacks was also submitted. As described above, it consists of the divestiture of the
Betterfood and Lu Liga brands.
23
104. This package removes the entire overlap for baby-meals26, GUM27, and drinks28. The
Commission in particular notes that the acquirer could be transferred the distribution
agreement of Danone with its Belgian distributor, which means that it will benefit from
the access to retailers and customer relationships this distributor has achieved. Upon the
results of the market test, the license and black-out period are extended each to 5 years,
the acquirer will have a license on the […] technology (used for the manufacturing of
some products already marketed in Belgium) as well as technical assistance for
manufacturing, and all current Bledina brands will be included in the package. Similarly
to the French package, the acquirer will be able to benefit from innovations introduced
by Danone/Bledina for the next two years.
105. Contrary to the production of baby-milk in France, where higher volumes are at
stake, a 3-year supply agreement would not raise major difficulties besides cost
monitoring. First, a share of Danone's current production (fruit pouches, meal bowls,
soups and purees) is outsourced and this part of the production would be transferred to
the acquirer. Second, companies able to manufacture Danone's products are active on
the market (but outside of Belgium) and three years will be sufficient to migrate
Danone's product portfolio29. Third, given the low volumes at stake, additional capacity
is easier to find/add. Finally, the buyer will benefit from Danone's technical assistance to
operate the migration of the production to its production lines. Accordingly, respondents
to the market investigation did not express concerns regarding the arrangement provided
in the commitments.
106. As regards baby snacks, the commitment will reduce the parties' market share to [15-
25] %, thereby removing the existence of serious doubts30.
107. In conclusion, the attached commitments submitted by Danone remedy the serious
doubts raised by the Commission on the above mentioned Belgian markets for baby
meal, baby GUM, baby snacks, and baby drinks.
Netherlands
108. As explained above, Danone is active in the Netherlands through its Belgian
distributor, and Danone has agreed to extend the Belgian remedy package regarding
baby meals to the Netherlands. The package will therefore include, among others, 5-year
licensing on brands, supply-agreement, and the transfer of Danone's distribution
26 The market share of the licensed brands are the following: Pots Bledina ([5-10] %), Repas du Soir ([0-5]
%), Bledichef ([15-25] %), Idees de Maman ([0-5] %), Bledisoup ([0-5] %), Compotines Bledina ([5-10]
%), Pots Fruits Bledina ([0-5] %), Pots Desserts Bledina ([0-5] %), Beldimilky ([0-5] %). Les Petits
Grands retained by Danone achieved only marginal sales in 2007.
27 The market shares of the licensed brands on the GUM market (including liquid cereal) are: Gervais ([5-
10] %) and Bledilait/Bledilac ([0-5] %).
28 Blédi à Boire amounts to [5-10] % of the market
29 See market test sent to competitors, question 23
30 Betterfood and Lu Vitabis respectively amount to [40-50] % and [25-35] % of the market.
24
contract. This undertaking removes the overlap on the Dutch market for baby meals and
remedies the identified competition concerns.
109. As regards snacks, Danone is almost exclusively active through its brand LU Liga
([45-55] % market share in 2006), which should be divested to Kraft as part of the
Kraft/Danone transaction. A remedy has been included in the remedy package, whereby
Danone commits to sell the Lu Liga brand in the Netherlands. This will remove any
competition concerns.
110. Consequently, the attached commitment addresses the serious doubts raised on the
Dutch markets for baby meals and baby snacks.
(d) Conclusion on the commitments
111. The Commission therefore considers the commitments suitable for remedying the
serious doubts on the compatibility of the concentration with the Common Market and
the EEA, which have been established in the previous sections of this Decision.
VI. CONDITIONS AND OBLIGATIONS
112. Under the first sentence of the second subparagraph of Article 6(2) of the Merger
Regulation, the Commission may attach to its decision conditions and obligations
intended to ensure that the undertakings concerned comply with the commitments they
have entered into vis-à-vis the Commission with a view to rendering the concentration
compatible with the common market.
113. The fulfilment of the measure that gives rise to the structural change of the market is
a condition, whereas the implementing steps which are necessary to achieve this result
are generally obligations on the parties. Where a condition is not fulfilled, the
Commission’s decision declaring the concentration compatible with the common market
no longer stands. Where the undertakings concerned commit a breach of an obligation,
the Commission may revoke the clearance decision in accordance with Article 6(3) of
the Merger Regulation. The undertakings concerned may also be subject to fines and
periodic penalty payments under Articles 14(2) and 15(1) of the Merger Regulation.
114. In accordance with the basic distinction described above, the decision in this case is
conditioned on the full compliance with Sections B to E of the Commitments submitted
by the notifying party on 30/10/2007.
115. The remaining requirements set out in the other Sections of the Commitments
submitted by the parties on 30/10/2007 are considered to constitute obligations.
25
VII. CONCLUSION
116. The Commission has concluded that the remedies submitted by the Parties are sufficient
to remove the serious doubts raised by the concentration. Accordingly, subject to the full
compliance with the commitments submitted by the Parties 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) and
Article 6(2) of Council Regulation (EC) No 139/2004.
117. The detailed text of the commitments is annexed to this decision. The full text of the
annexed commitments forms an integral part to this decision.
For the Commission
signed
Neelie KROES
Member of the Commission
By hand and by fax: 00 32 2 296 4301
European Commission – Merger Task Force
DG Competition
Rue Joseph II 70
B-1000 Brussels
Case M. 4842 – DANONE / NUMICO
COMMITMENTS TO THE EUROPEAN COMMISSION
Pursuant to Article 6(2) of Council Regulation (EC) No. 139/2004 (the “Merger
Regulation”), Groupe Danone S.A. (“Danone”) and Royal Numico N.V. (“Numico”) (the
“Parties”) hereby provide the following Commitments (the “Commitments”) in order to
enable the European Commission (the “Commission”) to declare the acquisition by Danone
of Numico compatible with the common market and the EEA Agreement by its decision
pursuant to Article 6(1)(b) of the Merger Regulation (the “Decision”).
These Commitments are given by the Parties without prejudice to their position that
the notified concentration does not significantly impede effective competition within the
common market or a substantial part of it, and is therefore compatible with the common
market and the functioning of the EEA, and that the initial remedy package offered by the
Parties on September 24, 2007, would adequately address any competitive concern arising
from the transaction.
The Commitments shall take effect upon the date of adoption of the Decision.
This text shall be interpreted in the light of the Decision to the extent that the
Commitments are attached as conditions and obligations, in the general framework of
Community law, in particular in the light of the Merger Regulation, and by reference to the
Commission Notice on remedies acceptable under Council Regulation (EEC) No 4064/89
and under Commission Regulation (EC) No 447/98.
27
A. DEFINITIONS
For the purpose of the Commitments, the following terms shall have the following meaning:
Affiliated Undertakings: undertakings controlled by the Parties and/or by the
ultimate parents of the Parties, whereby the notion of
control shall be interpreted pursuant to Article 3 of the
Merger Regulation and in the light of the Commission
Consolidated Jurisdictional Notice.
Blédina: a company controlled by Danone active in the baby food
business, incorporated under the laws of France with its
registered address at BP 432, 383, rue Philippe Héron,
69654 Villefranche sur Saone Cedex, France and registered
with the Commercial/Company Register at Villefranche sur
Saone-Tarare under the number RCS 301 374 922.
Closing: the transfer of the legal title of the Divested Business to the
Purchaser.
Danone: a company incorporated under the laws of France, with its
registered office at 17, boulevard Haussmann 75009 Paris,
France and registered with the Commercial/Company
Register at Paris under number RCS 552 032 534.
Divested Business: the businesses as defined in Section B and the Schedules,
that the Parties commit to divest.
Divestiture Trustee: one or more natural or legal person(s), independent from
the Parties, approved by the Commission and appointed by
Danone and who has received from Danone the exclusive
Trustee Mandate to sell the Divested Business to a
Purchaser at no minimum price.
28
Effective Date: the date of adoption of the Decision.
First Divestiture Period: the period of […] months from the Effective Date.
Hold Separate Manager(s): the person(s) appointed by Danone for the Divested
Business to manage the day-to-day business under the
supervision of the Monitoring Trustee.
Key Personnel: all personnel necessary to maintain the viability and
competitiveness of the Divested Business, as listed in the
Schedule.
Monitoring Trustee: one or more natural or legal person(s), independent from
the Parties, who is approved by the Commission and
appointed by Danone, and who has the duty to monitor
Danone’s compliance with the conditions and obligations
attached to the Decision.
Personnel: all personnel currently employed by the Divested Business,
including Key Personnel, staff seconded to the Divested
Business, shared personnel and the additional personnel
listed in the Schedule.
Purchaser: one or more entities approved by the Commission as
acquirer(s) of the Divested Business in accordance with the
criteria set out in Section E.
Trustee(s): the Monitoring Trustee and the Divestiture Trustee.
Trustee Divestiture Period: the period of […] months from the end of the First
Divestiture Period.
29
For the avoidance of doubt, where in the commitments below both Danone and Numico are
mentioned, these commitments apply to Danone to the extent that the business to be divested
is a Danone business, and to Numico to the extent that the business to be divested is a
Numico business. Danone procures that, after the time of closing of the Danone/Numico
transaction, Numico will comply with the commitments below.
B. THE DIVESTED BUSINESS
Identification of the Divested Business
1. Danone and Numico agree to divest:
(a) The Infant Formula and Follow-on (“IFFO”) and Growing-Up (“GUM”) Milk
Business in France;
(b) The Baby Meal Business in Belgium and the Netherlands;
(c) The GUM Business in Belgium;
(d) The Baby Cereal Business in Belgium;
(e) The Baby Snack Business in Belgium and the Netherlands; and
(f) The Baby Drink Business in France and Belgium.
Definition of the Divested Business
2. As described in schedules 1 to 7, the Divested Business in particular consists of:
(a) The IFFO and GUM Milk Business in France: the Numico IFFO milk business in
France operated under the following brands:
(i) Lemiel and Milumel (standard IFFO); and
(ii) Milumel AR (therapeutic IFFO);
including the absolute assignment of all rights of Numico in France in the brands
mentioned in (i) and (ii) above and all relevant product formulae, recipes,
goodwill and intellectual property rights together with the copyright in the
packaging, advertising and promotional materials used in relation to the products
sold under these brands (the “IFFO Assigned Brands”);
(iii) Nutricia and Milupa (babyfood);
(iv) Nutricia Confort +, Nutricia Soja, Milupa Digest, and Milupa Conformil
(standard IFFO);
(v) HN 25, GES 45, Pregomine, Pepti-Junior, Nutrilon AR, Milupa HA, and
Milupa Prema (therapeutic IFFO); and
(vi) Nutricia Croissance and Nutricia Kid (GUM).
30
including an exclusive license for the brands mentioned in (iii), (iv), (v) and (vi)
above for use solely in France (excluding the French overseas territories - “DOMTOM”-),
in the babyfood sector for the Nutricia and Milupa umbrella brands, and
IFFO and GUM for the sub-brands mentioned in (iv), (v) and (vi) (all together,
the “IFFO/GUM Licensed Brands”). This exclusive license shall be concluded
for a period of 5 years.
(b) The Baby Meal Business in Belgium and the Netherlands: the Blédina baby meal
business in Belgium and the Netherlands operated under the brands Blédina,
Blédichef, Les Idées de Maman, Compotines, Blédicrèm,’ Blédisoup, Petit Blédi,
and Blédimilky and, at the option of the purchaser, the Blédina baby meal
business in Belgium and the Netherlands operated under the designation Repas
du Soir.
This comprises (i) an exclusive license for the brands Blédina, Blédichef, Les
Idées de Maman, Compotines, Blédicrèm,’ Blédisoup, Petit Blédi, and Blédimilky
for use solely in Belgium and the Netherlands for a period of 5 years, including
all current product recipes and formulations, the goodwill, and the copyright in
the packaging, advertising and promotional materials used in relation to the
products sold under these brands; and, at the option of the purchaser, (ii) the
exclusive authorization to use the designation Repas du Soir (which is not a
registered trademark in Belgium and the Netherlands) solely in Belgium and the
Netherlands for a period of 5 years, and all current product recipes and
formulations, the goodwill, and the copyright in the packaging, advertising and
promotional materials used in relation to the products sold under this designation.
(c) The GUM Business in Belgium: the Danone/Blédina GUM business in Belgium
operated under the brands 1-2-3 and Blédilait.
This comprises (i) an exclusive license for the brand Blédilait for use solely in
Belgium for a period of 5 years, including all current product recipes and
formulations, the goodwill, and the copyright in the packaging, advertising and
promotional materials used in relation to the products sold under this brand; and
(ii) the absolute assignment of all rights of Danone in the 1-2-3 brand and all
relevant product formulae, recipes, goodwill and intellectual property rights
together with the copyright in the packaging, advertising and promotional
materials used in relation to the products sold under this brand;
(d) The Baby Cereal Business in Belgium: the Blédina baby cereal business in
Belgium operated under the Blédilac brand. This comprises an exclusive license
for the brand Blédilac for use solely in Belgium for a period of 5 years, including
all current product recipes and formulations, the goodwill, and the copyright in
the packaging, advertising and promotional materials used in relation to the
products sold under this brand.
(e) The Baby Snack Business in Belgium and the Netherlands: the Danone/Blédina
baby snack business operated under the brands LU Vitabis and Betterfood in
Belgium and the brand LU Liga in the Netherlands; this comprises the absolute
assignment of all rights of Danone in the above-mentioned brands;
31
(f) The Baby Drink Business: the Numico baby drink business operated under the
brand Babysoif in France including the absolute assignment of all rights of
Numico in the above-mentioned brand and all relevant product formulae, recipes,
goodwill and intellectual property rights together with the copyright in the
packaging, advertising and promotional materials used in relation to the products
sold under this brand; and
the exclusive authorization by Danone to use the designation Minibiberon (which
is not a registered trademark in Belgium) solely in Belgium for a period of 5
years, and all current product recipes and formulations, the goodwill, and the
copyright in the packaging, advertising and promotional materials used in relation
to the products sold under this designation.
3. The Divested Business, described in more detail in the Schedules, includes where
applicable:
(a) all intangible assets (including intellectual property rights), which contribute to
the current operation or are necessary to ensure the viability and competitiveness
of the Divested Business;
(b) all licences, permits and authorisations issued by any governmental organisation
for the benefit of the Divested Business;
(c) all contracts, leases, commitments and customer orders of the Divested Business;
all customer, credit and other records of the Divested Business (items referred to
under (a)-(c) hereinafter collectively referred to as “Assets”);
(d) the Personnel; and
(e) the benefit, for a transitional period and on terms and conditions at least
equivalent to those at present afforded to the Divested Business, of all current
arrangements under which Danone, Numico or Affiliated Undertakings supply
products or services to the Divested Business, as detailed in the Schedule, unless
otherwise agreed with the Purchaser.
4. The “goodwill” as referred to in these commitments shall comprise the independent
customers of the Divested Business with whom:
(a) the Divested Business did business in the year 2006, and, for business 2(a)(i)
[Milumel], in 2005,
(b) the Divested Business did business in the year 2007, up to the date a binding
agreement is entered into for the transfer of the Divested Business, and
(c) the Divested Business has a framework agreement in the years 2006 or 2007 up
to the closing Date for the supply of products which are part of the Divested
Business.
32
5. Unless otherwise stated the divestment will not include:
(a) For the Baby Meal Business in Belgium and the IFFO/GUM Licensed Brands in
France, the assignment of brands (trademarks), since the purchaser shall re-brand
the products concerned during the period of the license;
(b) any right of the licensees of any of the licensed brands to use the brands in other
countries than those which are specified in the respective licensing agreement.
For the avoidance of doubt, Danone and Numico and their Affiliated Undertakings will
be entitled to use the licensed brands after expiry of the license agreements and of the
period referred to in paragraph 11 below (again and also) for the products concerned
and the countries concerned by the licenses.
C. RELATED COMMITMENTS
Preservation of Viability, Marketability and Competitiveness
6. From the Effective Date until Closing, Danone shall preserve the economic viability,
marketability and competitiveness of the Divested Business in accordance with good
business practice, and shall minimise as far as possible any risk of loss of competitive
potential of the Divested Business. In particular Danone and Numico undertake:
(a) not to carry out any act upon their own authority that might have a significant
adverse impact on the value, management or competitiveness of the Divested
Business or that might alter the nature and scope of activity, or the industrial or
commercial strategy or the investment policy of the Divested Business;
(b) to make available sufficient resources for the development of the Divested
Business, on the basis and continuation of the existing business plans; and
(c) to take all reasonable steps, including appropriate incentive schemes (based on
industry practice), to encourage all Key Personnel to remain with the Divested
Business.
33
Hold-separate obligations of Parties
7. Danone and Numico commit, from the Effective Date until Closing, to keep the
Divested Business separate from their other retained businesses and to ensure that Key
Personnel of the Divested Business – including the Hold Separate Manager(s) – have
no involvement in any business retained and vice versa, and shall also ensure that the
Personnel does not report to any individual outside the Divested Business.
8. Until Closing, Danone and Numico shall assist the Monitoring Trustee in ensuring that
the Divested Business is managed as a distinct and saleable entity separate from the
businesses retained by the Parties. Danone shall appoint Hold Separate Manager(s) who
shall be responsible for the management of the Divested Business, under the
supervision of the Monitoring Trustee. The Hold Separate Manager(s) shall manage the
Divested Business independently and in the best interest of the business with a view to
ensuring its continued economic viability, marketability and competitiveness and its
independence from the businesses retained by the Parties.
Ring-fencing
9. Danone and Numico shall implement all necessary measures to ensure that they do not
after the Effective Date obtain any business secrets, know-how, commercial
information, or any other information of a confidential or proprietary nature relating to
the Divested Business. In particular, the participation of the Divested Business in a
central information technology network shall be severed to the extent possible, without
compromising the viability of the Divested Business. Danone may obtain information
relating to the Divested Business which is reasonably necessary for the divestiture of
the Divested Business or whose disclosure to Danone is required by law.
Non-solicitation clause
10. The Parties undertake, subject to customary limitations, not to solicit, and to procure
that Affiliated Undertakings do not solicit, the Key Personnel transferred with the
Divested Business for a period of two years after Closing.
Restriction of use of brands
11. Danone takes the following commitments:
(a) With respect to the brands for which an exclusive licence has been granted
according to paragraphs 2(b), 2(c), 2(d), 2(f): not to use the prefix “Blédi” in
relation to any relevant product sold by it in Belgium and the Netherlands during
the license period and the “blackout” period defined below, except for a
transitional period of up to 12 months necessary for the products not covered by
the Licensed Brands to be re-branded to other brands;
(b) With respect to the brands for which an exclusive licence has been granted
according to paragraph 2 and as described in details in Schedules 1 to 6 (including
the Repas du Soir and Minibiberon designations): not to re-introduce or promote
the licensed brands or designations for a period of 5 years after the termination of
the 5-year initial agreement.
34
D. THE DIVESTMENT PROCEDURE
12. In order to restore effective competition, Danone commits to divest, or procure the
divestiture of the Divested Business by the end of the Trustee Divestiture Period as a
going concern to a purchaser and on terms approved by the Commission in accordance
with the procedure described in paragraph 21.
13. To carry out the divestiture, Danone commits to find a purchaser and to enter into a
final binding agreement for the divestiture of the Divested Business within the First
Divestiture Period. If Danone has not entered into such an agreement at the end of the
First Divestiture Period, Danone shall grant the Divestiture Trustee an exclusive
mandate to sell the Divested Business in accordance with the procedure described in
paragraph 30 in the Trustee Divestiture Period.
14. Danone shall be deemed to have complied with this commitment if, by the end of the
Trustee Divestiture Period, Danone has entered into a final binding agreement, if the
Commission approves the Purchaser and the terms in accordance with the procedure
described in paragraph 21 and if the closing of the transfer of the Divested Business
takes place within a period not exceeding 3 months after the approval of the purchaser
and the terms of the agreement by the Commission.
15. In order to maintain the structural effect of the Commitments, the Parties shall, for a
period of 10 years after the Effective Date, not acquire direct or indirect influence over
the whole or part of the Divested Business, unless the Commission has previously
found that the structure of the market has changed to such an extent that the absence of
influence over the Divested Business is no longer necessary to render the proposed
concentration compatible with the common market.
Due Diligence
16. In order to enable potential purchasers to carry out a reasonable due diligence of the
Divested Business, Danone shall, subject to customary confidentiality assurances and
dependent on the stage of the divestiture process:
(a) provide to potential purchasers sufficient information as regards the Divested
Business;
(b) provide to potential purchasers sufficient information relating to the Personnel
and allow them reasonable access to the Personnel.
Reporting
17. Danone shall submit written reports in French or English on potential purchasers of the
Divested Business and developments in the negotiations with such potential purchasers
to the Commission and the Monitoring Trustee no later than 10 days after the end of
every month following the Effective Date (or otherwise at the Commission’s request).
35
18. The Parties shall inform the Commission and the Monitoring Trustee on the preparation
of the data room documentation and the due diligence procedure and shall submit a
copy of an information memorandum to the Commission and the Monitoring Trustee
before sending the memorandum out to potential purchasers.
E. THE PURCHASER
19. In order to ensure the immediate restoration of effective competition, the Purchaser, in
order to be approved by the Commission, must:
(a) be independent of and unconnected to the Parties;
(b) have the financial resources, proven expertise and incentive to maintain and
develop the Divested Business as a viable and active competitive force in
competition with the Parties and other competitors;
(c) neither be likely to create, in the light of the information available to the
Commission, prima facie competition concerns nor give rise to a risk that the
implementation of the Commitments will be delayed, and must, in particular,
reasonably be expected to obtain all necessary approvals from the relevant
regulatory authorities for the acquisition of the Divested Business (the beforementioned
criteria for the purchaser hereafter the “Purchaser Requirements”).
20. When Danone has or is about to reach an agreement with a purchaser, it shall submit a
fully documented and reasoned proposal, including a copy of the final agreement(s), to
the Commission and the Monitoring Trustee. Danone must be able to demonstrate to
the Commission that the purchaser meets the Purchaser Requirements and that the
Divested Business is being sold in a manner consistent with the Commitments. For the
approval, the Commission shall verify that the purchaser fulfils the Purchaser
Requirements and that the Divested Business is being transferred in a manner
consistent with the Commitments. The Commission may approve the divestiture of the
Divested Business without one or more Assets or parts of the Personnel, if this does not
affect the viability and competitiveness of the Divested Business after the transfer,
taking account of the proposed purchaser.
F. TRUSTEE
I. Appointment Procedure
21. Danone shall appoint a Monitoring Trustee to carry out the functions specified in the
Commitments for a Monitoring Trustee. If Danone has not entered into a binding
agreement for the Divested Business one month before the end of the First Divestiture
Period or if the Commission has rejected a purchaser proposed by Danone at that time
or thereafter, Danone shall appoint a Divestiture Trustee to carry out the functions
specified in the Commitments for a Divestiture Trustee. The appointment of the
Divestiture Trustee shall take effect upon the commencement of the Trustee Divestiture
Period.
22. The Trustee shall be independent of the Parties, possess the necessary qualifications to
carry out its mandate, for example as an investment bank or consultant or auditor, and
shall neither have nor become exposed to a conflict of interest. The Trustee shall be
36
remunerated by the Parties in a way that does not impede the independent and effective
fulfillment of its mandate. In particular, where the remuneration package of a
Divestiture Trustee includes a success premium linked to the final transfer value of the
Divested Business, the fee shall also be linked to a divestiture within the Trustee
Divestiture Period.
Proposal by the Parties
23. No later than one week after the Effective Date, Danone shall submit a list of one or
more persons whom Danone proposes to appoint as the Monitoring Trustee to the
Commission for approval. No later than one month before the end of the First
Divestiture Period, Danone shall submit a list of one or more persons whom Danone
proposes to appoint as Divestiture Trustee to the Commission for approval. The
proposal shall contain sufficient information for the Commission to verify that the
proposed Trustee fulfils the requirements set out in paragraph 22 and shall include:
(a) the full terms of the proposed mandate, which shall include all provisions
necessary to enable the Trustee to fulfill its duties under these Commitments;
(b) the outline of a work plan which describes how the Trustee intends to carry out
its assigned tasks;
(c) an indication whether the proposed Trustee is to act as both Monitoring Trustee
and Divestiture Trustee or whether different trustees are proposed for the two
functions.
Approval or rejection by the Commission
24. The Commission shall have the discretion to approve or reject the proposed Trustee(s)
and to approve the proposed mandate subject to any modifications it deems necessary
for the Trustee to fulfill its obligations. If only one name is approved, Danone shall
appoint or cause to be appointed, the individual or institution concerned as Trustee, in
accordance with the mandate approved by the Commission. If more than one name is
approved, Danone shall be free to choose the Trustee to be appointed from among the
names approved. The Trustee shall be appointed within one week of the Commission’s
approval, in accordance with the mandate approved by the Commission.
New proposal by the Parties
25. If all the proposed Trustees are rejected, Danone shall submit the names of at least two
more individuals or institutions within one week of being informed of the rejection, in
accordance with the requirements and the procedure set out in paragraphs 22 and 23.
Trustee nominated by the Commission
26. If all further proposed Trustees are rejected by the Commission, the Commission shall
nominate a Trustee, whom Danone shall appoint, or cause to be appointed, in
accordance with a trustee mandate approved by the Commission.
37
II. Functions of the Trustee
27. The Trustee shall assume its specified duties in order to ensure compliance with the
Commitments. The Commission may, on its own initiative or at the request of the
Trustee or Danone, give any orders or instructions to the Trustee in order to ensure
compliance with the conditions and obligations attached to the Decision.
Duties and obligations of the Monitoring Trustee
28. The Monitoring Trustee shall:
(i). propose in its first report to the Commission a detailed work plan describing how
it intends to monitor compliance with the obligations and conditions attached to
the Decision.
(ii). oversee the on-going management of the Divested Business with a view to
ensuring its continued economic viability, marketability and competitiveness and
monitor compliance by Danone with the conditions and obligations attached to
the Decision. To that end the Monitoring Trustee shall:
(a) monitor the preservation of the economic viability, marketability and
competitiveness of the Divested Business, and the keeping separate of the
Divested Business from the business retained by the Parties, in accordance
with paragraphs 6 and 7 of the Commitments;
(b) supervise the management of the Divested Business as a distinct and
saleable entity, in accordance with paragraph 8 of the Commitments;
(c) (i) in consultation with Danone, determine all necessary measures to ensure
that Danone does not after the effective date obtain any business secrets,
know-how, commercial information, or any other information of a
confidential or proprietary nature relating to the Divested Business, in
particular strive for the severing of the Divested Business’ participation in a
central information technology network to the extent possible, without
compromising the viability of the Divested Business, and (ii) decide
whether such information may be disclosed to Danone as the disclosure is
reasonably necessary to allow Danone to carry out the divestiture or as the
disclosure is required by law;
(d) monitor the splitting of assets and the allocation of Personnel between the
Divested Business and Danone, Numico or Affiliated Undertakings;
(iii). assume the other functions assigned to the Monitoring Trustee under the
conditions and obligations attached to the Decision.
(iv). In particular, the Monitoring trustee should review the provisions of the potential
supply agreements between Danone and the acquirer(s) of the divested business
and ensure their compatibility with the restoration of effective competition on the
relevant markets. Such supply agreements should include fast track arbitration
38
clauses by a third party, should a dispute arise at a later stage. This paragraph
does not apply to the potential supply-agreement (supply of IFFO and GUM
product by the acquirer of the divested business to Danone) mentioned in
schedule 7, paragraph 3(b).
(v). propose to Danone such measures as the Monitoring Trustee considers necessary
to ensure Danone’s compliance with the conditions and obligations attached to
the Decision, in particular the maintenance of the full economic viability,
marketability or competitiveness of the Divested Business, the holding separate
of the Divested Business and the non-disclosure of competitively sensitive
information;
(vi). review and assess potential purchasers as well as the progress of the divestiture
process and verify that, dependent on the stage of the divestiture process, (a)
potential purchasers receive sufficient information relating to the Divested
Business and the Personnel in particular by reviewing, if available, the data room
documentation, the information memorandum and the due diligence process, and
(b) potential purchasers are granted reasonable access to the Personnel;
(vii). provide to the Commission, sending Danone a non-confidential copy at the same
time, a written report within 15 days after the end of every month. The report
shall cover the operation and management of the Divested Business so that the
Commission can assess whether the business is held in a manner consistent with
the Commitments and the progress of the divestiture process as well as potential
purchasers. In addition to these reports, the Monitoring Trustee shall promptly
report in writing to the Commission, sending Danone a non-confidential copy at
the same time, if it concludes on reasonable grounds that Danone is failing to
comply with these Commitments;
(viii).within one week after receipt of the documented proposal referred to in paragraph
20, submit to the Commission a reasoned opinion as to the suitability and
independence of the proposed purchaser and the viability of the Divested
Business after the divestiture and as to whether the Divested Business is
transferred in a manner consistent with the conditions and obligations attached to
the Decision, in particular, if relevant, whether the transfer of the Divested
Business without one or more Assets or not all of the Personnel affects the
viability of the Divested Business after the divestiture, taking account of the
proposed purchaser.
Duties and obligations of the Divestiture Trustee
29. Within the Trustee Divestiture Period, the Divestiture Trustee shall sell at no minimum
price the Divested Business, to a purchaser, provided that the Commission has
approved both the purchaser and the final binding agreement in accordance with the
procedure laid down in paragraph 20. The Divestiture Trustee shall include in the
agreement such terms and conditions as it considers appropriate for an expedient
divestiture in the Trustee Divestiture Period. In particular, the Divestiture Trustee may
include in the agreement such customary representations and warranties and
indemnities as are reasonably required to effect the divestiture. The Divestiture Trustee
shall protect the legitimate financial interests of Danone, subject to the Parties’
39
unconditional obligation to divest at no minimum price in the Trustee Divestiture
Period.
30. In the Trustee Divestiture Period (or otherwise at the Commission’s request), the
Divestiture Trustee shall provide the Commission with a comprehensive monthly report
written in French on the progress of the divestiture process. Such reports shall be
submitted within 15 days after the end of every month with a simultaneous copy to the
Monitoring Trustee and a non-confidential copy to the Parties.
III. Duties and obligations of the Parties
31. Danone shall provide and shall cause its advisors to provide the Trustee with all such
cooperation, assistance and information as the Trustee may reasonably require to
perform its tasks. The Trustee shall have full and complete access to any of Danone’s
or the Divested Business’ books, records, documents, management or other personnel,
facilities, sites and technical information necessary for fulfilling its duties under the
Commitments and Danone and the Divested Business shall provide the Trustee upon
request with copies of any document. Danone and the Divested Business shall make
available to the Trustee one or more offices on their premises and shall be available for
meetings in order to provide the Trustee with all information necessary for the
performance of its tasks.
32. Danone shall provide the Monitoring Trustee with all managerial and administrative
support that it may reasonably request on behalf of the management of the Divested
Business. This shall include all administrative support functions relating to the
Divested Business which are currently carried out at headquarters level. Danone shall
provide and shall cause its advisors to provide the Monitoring Trustee, on request, with
the information submitted to potential purchasers, in particular give the Monitoring
Trustee access to the data room documentation and all other information granted to
potential purchasers in the due diligence procedure. Danone shall inform the
Monitoring Trustee on possible purchasers, submit a list of potential purchasers, and
keep the Monitoring Trustee informed of all developments in the divestiture process.
33. Danone shall grant or procure Affiliated Undertakings to grant comprehensive powers
of attorney, duly executed, to the Divestiture Trustee to effect the divestiture, the
Closing and all actions and declarations which the Divestiture Trustee considers
necessary or appropriate to achieve the divestiture and the Closing, including the
appointment of advisors to assist with the divestiture process. Upon request of the
Divestiture Trustee, Danone shall cause the documents required for effecting the
divestiture and the Closing to be duly executed.
34. Danone shall indemnify the Trustee and its employees and agents (each an
“Indemnified Party”) and hold each Indemnified Party harmless against, and hereby
agrees that an Indemnified Party shall have no liability to Danone for any liabilities
arising out of the performance of the Trustee’s duties under the Commitments, except
to the extent that such liabilities result from the willful default, recklessness, gross
negligence or bad faith of the Trustee, its employees, agents or advisors.
35. At the expense of Danone, the Trustee may appoint advisors (in particular for corporate
finance or legal advice), subject to Danone’s approval (this approval not to be
40
unreasonably withheld or delayed) if the Trustee considers the appointment of such
advisors necessary or appropriate for the performance of its duties and obligations
under the Mandate, provided that any fees and other expenses incurred by the Trustee
are reasonable. Should Danone refuse to approve the advisors proposed by the Trustee
the Commission may approve the appointment of such advisors instead, after having
heard Danone. Only the Trustee shall be entitled to issue instructions to the advisors.
Paragraph 28 shall apply mutates mutandis. In the Trustee Divestiture Period, the
Divestiture Trustee may use advisors who served Danone during the Divestiture Period
if the Divestiture Trustee considers this in the best interest of an expedient divestiture.
IV. Replacement, discharge and reappointment of the Trustee
36. If the Trustee ceases to perform its functions under the Commitments or for any other
good cause, including the exposure of the Trustee to a conflict of interest:
(a) the Commission may, after hearing the Trustee, require Danone to replace the
Trustee; or
(b) Danone, with the prior approval of the Commission, may replace the Trustee.
37. If the Trustee is removed according to paragraph 36, the Trustee may be required to
continue in its function until a new Trustee is in place to whom the Trustee has effected
a full hand over of all relevant information. The new Trustee shall be appointed in
accordance with the procedure referred to in paragraphs 21-26.
38. Beside the removal according to paragraph 36, the Trustee shall cease to act as Trustee
only after the Commission has discharged it from its duties after all the Commitments
with which the Trustee has been entrusted have been implemented. However, the
Commission may at any time require the reappointment of the Monitoring Trustee if it
subsequently appears that the relevant remedies might not have been fully and properly
implemented.
F. THE REVIEW CLAUSE
39. The Commission may, where appropriate, in response to a request from Danone
showing good cause and accompanied by a report from the Monitoring Trustee:
(i). Grant an extension of the time periods foreseen in the Commitments, or
(ii). Waive, modify or substitute, in exceptional circumstances, one or more of the
undertakings in these Commitments.
Where Danone seeks an extension of a time period, it shall submit a request to the
Commission no later than one month before the expiry of that period, showing good
cause. Only in exceptional circumstances shall Danone be entitled to request an
extension within the last month of any period.
41
duly authorised for and on behalf of Groupe Danone S.A.
Christiane Butte
General Counsel
Groupe Danone S.A.
_____________________________
42
SCHEDULE 1 – IFFO AND GUM MILK BUSINESS IN FRANCE
1. The IFFO and GUM Milk Business in France includes:
(a) the following main intangible assets:
a. the brands Lemiel and Milumel (standard IFFO) and Milumel AR (therapeutic
IFFO) in France (the “IFFO Assigned Brands”), and all relevant product
formulae, recipes, goodwill and intellectual property rights together with the
copyright in the packaging, advertising and promotional materials used in
relation to the products sold under these brands;
b. an exclusive license for the brands Nutricia and Milupa for use solely in
France (excluding the French overseas territories - “DOM-TOM”-) in the
babyfood sector for a period of 5 years;
c. an exclusive license for the brands HN 25, GES 45, Pregomine, Comformil,
Milupa Digest, Milupa Conformil, Milupa HA, Milupa Prema for use solely in
France (excluding the French overseas territories - “DOM-TOM”-) in the
IFFO sector for a period of 5 years;
d. an exclusive license for the brands Nutricia Confort +, Nutricia Soja, PeptiJunior,
Nutrilon AR, for use solely in France (excluding the French overseas
territories - “DOM-TOM”-) in the IFFO sector for a period of 5 years;
e. an exclusive license for the brands Nutricia Croissance and Nutricia
Croissance Kid for use solely in France (excluding the French overseas
territories - “DOM-TOM”-) in the GUM sector for a period of 5 years ;
(the brands referred to above under items b. through e. are designated hereafter as
the “IFFO/GUM Licensed Brands”)
f. an exclusive license for the use in France (excluding the French overseas
territories - “DOM-TOM”-) of all patents related to the IFFO and GUM
products covered by the IFFO/GUM Licensed Brands, including a license on
the FOS-GOS patents for the Milupa IFFO products, for a period of 5 years,
followed by a non-exclusive license for the lifetime of the patents; the
exclusivity for the initial 5-year period shall remain subject to the continued
validity of patent protection for the underlying FOS-GOS technology; and
g. an exclusive license for the use in France (excluding the French overseas
territories - “DOM-TOM”-) of all trade secrets and know-how related to the
IFFO and GUM products covered by the IFFO/GUM Licensed Brands for a
period of 5 years, including in particular:
(i) all current recipes and formulations,
(ii) manufacturing processes (to the extent that such information is proprietary
to Numico);
43
(iii)all available pre-clinical, clinical and marketing data relating to the
products covered by the IFFO/GUM Licensed Brands;
(iv)for use in France only, access to the R&D work that is in progress to
support the new product launches planned in France within 2 years from
Closing; and
(v) copyright in the packaging, advertising and promotional materials
currently used in relation to products covered by the Licensed Brands.
(b) After the expiry of the exclusive license for the IFFO/GUM Licensed Brands,
Danone commits to grant the purchaser a non-exclusive license for the recipes
and formulations on an arm’s length basis at the request of the purchaser;
(c) At the option of the purchaser, a 3-year at cost transitional supply agreement for
the products covered by the IFFO/GUM Licensed Brands. If so requested by the
purchaser, Danone stands ready to reserve sufficient production capacities in the
relevant Numico plants and/or to use its best efforts to transfer the benefits of
existing third-party arrangements with co-manufacturers;
(d) At the option of the purchaser, a license for the use in France of the Eazypack
packaging for the IFFO powder products covered by the IFFO/GUM Licensed
Brands;
(e) At the option of the purchaser, the provision of manufacturing technical
assistance for 12 months;
(f) At the option of the purchaser, Numico’s […] IFFO and GUM milk plant located
in […], see Schedule 7);
(g) An exclusive license from the purchaser to the Parties for the use of the IFFO
Assigned Brands in the French overseas territories (“DOM-TOM”) for a period
of 5 years;
(h) All the tangible assets, contracts, customer orders, customer records and
personnel in relation with Numico’s IFFO and GUM milk businesses in France,
including:
a. Numico France’s employees dedicated to the babyfood business with product
and customer-base knowledge in France, amounting to approximately […]
employees, including the sales forces and the product development managers
(including […]);
b. the following Key Personnel:
[…]
c. part of the personnel shared with the clinical nutrition division of Numico
France in order to ensure the viability of the divested assets.
44
(i) the following main contracts, agreements, leases, commitments and
understandings, to the extent these relate to the Divested Business (baby food):
a. all customer contracts;
b. an agreement with […] for warehousing services;
c. agreements with various transporters for transportation services;
d. an agreement with […] for the lease of office space; and
(j) the following customer, credit and other records: all customer lists with contact
details, overdue lists with details per customer, and credit terms.
2. With respect to the IFFO/GUM Licensed Brands, the Divestment shall not include:
(k) An assignment of the Nutricia and Milupa umbrella brands, since the purchaser
shall re-brand the products covered by the IFFO/GUM Licensed Brands;
(l) Any right of the licensee of the IFFO/GUM Licensed Brands to use the
IFFO/GUM Licensed Brands in any country other than France; or
(m) Any right of the licensee of the IFFO/GUM Licensed Brands to use the
IFFO/GUM Licensed Brands for products other than babyfood products, in
particular for clinical nutrition products.
45
SCHEDULE 2 – THE BABY MEAL BUSINESS IN BELGIUM AND THE
NETHERLANDS
1. The Baby Meal Business in Belgium and the Netherlands includes:
(a) the following main intangible assets: an exclusive license for the brands Blédina,
Blédichef, Les Idées de Maman, Compotines, Blédicrèm’, Blédisoup, Petit Blédi,
and Blédimilky (the “Licensed Brands”) for use solely in Belgium and the
Netherlands for a period of 5 years, including all current product recipes and
formulations, the goodwill, and the copyright in the packaging, advertising and
promotional materials used in relation to the products sold under these brands;
In addition, at the option of the purchaser, the authorization to use the product
designation Repas du Soir (which is not a registered trademark) in Belgium and
the Netherlands for a period of 5 years, and all current product recipes and
formulations, the goodwill, and the copyright in the packaging, advertising and
promotional materials used in relation to the product sold under this designation.
(b) After the expiry of the exclusive license for the Licensed Brands and the initial 5year
period for the product designation Repas du Soir, Danone commits to grant
the purchaser a non-exclusive license for the recipes and formulations on an
arm’s length basis at the request of the purchaser;
(c) At the option of the purchaser, the transfer of Blédina’s distribution contract with
PAB for Belgium and the Netherlands; this transfer shall include the distribution
in Belgium of GUM, baby cereal and baby drink products described in schedules
3, 4 and 6.
(d) At the option of the purchaser, a license to Blédina’s […] technology for the
manufacture of […] products to be sold in Belgium and the Netherlands;
(e) A transfer of a production contract with […] for the manufacture of the relevant
SKUs of Les Idées de Maman;
(f) At the option of the purchaser, Danone shall make its best efforts to facilitate the
conclusion of a manufacturing contract between […] and the purchaser for the
products sold under the Blédisoup brand ;
(g) the following customer records: the records concerning Blédina’s commercial
relationship with PAB, and the data on local customers that has been
communicated by PAB to Blédina during this relationship;
(h) A 3-year at cost supply agreement for the products covered by the Licensed
Brands; and
(i) At the option of the purchaser, the provision of manufacturing technical
assistance for 3 years.
46
(j) For use in Belgium only, access to the R&D work that is in progress to
support the new product launches planned in Belgium within 2 years
from Closing
2. The Baby Meal Business in Belgium and the Netherlands shall not include:
(k) A license to the following brand in Belgium or the Netherlands: Les Petits
Grands (Blédina however commits to re-brand the corresponding products under
a non-“Blédi” trademark as soon as possible and within a maximum 12 month
period);
(l) An assignment of the relevant brands, since the purchaser shall re-brand the
products covered by the Licensed Brands; or
(m) Any right of the licensee of the Licensed Brands to use the Licensed Brands in
any country other than Belgium and the Netherlands.
47
SCHEDULE 3 – THE GUM BUSINESS IN BELGIUM
1. The GUM Business in Belgium includes:
(a) the following main intangible assets: (i) an exclusive license for the brands
Blédilait, for use solely in Belgium for a period of 5 years, including all current
product recipes and formulations, the goodwill, and the copyright in the
packaging, advertising and promotional materials used in relation to the products
sold under this brands; and (ii) the assignment of the brand 1-2-3, including all
current product recipes and formulations, the goodwill, and the copyright in the
packaging, advertising and promotional materials used in relation to the products
sold under these brands; and a license to the umbrella brand Gervais for use
solely in Belgium in relation in relation to GUM for a period of 5 years to allow
for the migration of the 1-2-3 brand under the purchaser’s umbrella brand;
Danone shall not re-introduce or promote the umbrella brand Gervais on the
baby-food markets for a period of five years after the termination of the 5-year
initial agreement.
(b) At the option of the purchaser, Danone shall make its best efforts to transfer
Danone’s manufacturing contract with […] for the GUM sold under the brand 1-
2-3; and
(c) For use in Belgium only, access to the R&D work that is in progress to
support the new product launches planned in Belgium within 2 years
from Closing
(d) A 3-year at cost supply agreement for Blédilait;
(e) and
(f) all customer lists with contact details, and credit terms.
2. The GUM Business in Belgium shall not include:
(a) An assignment of the brands Blédilait and Gervais, since the purchaser shall rebrand
the products covered by the Licensed Brands;
(b) Any right of the licensee to use Blédilait and Gervais in any country other than
Belgium.
48
SCHEDULE 4 – THE BABY CEREAL BUSINESS IN BELGIUM
1. The Baby Cereal Business in Belgium includes:
(a) The following main intangible asset: an exclusive license for the brand Blédilac
(the “Licensed Brand”) for use solely in Belgium for a period of 5 years,
including all current product recipes and formulations, the goodwill, and the
copyright in the packaging, advertising and promotional materials used in
relation to the products sold under this brand;
(b) After the expiry of the exclusive license for the Licensed Brand, Danone
commits to grant the purchaser a non-exclusive license for the recipes and
formulations on an arm’s length basis at the request of the purchaser;
(c) The following customer records: the data on local customers that has been
communicated by PAB to Blédina;
(d) For use in Belgium only, access to the R&D work that is in progress to
support the new product launches planned in Belgium within 2 years
from Closing
(e) A 3-year at cost supply agreement for the products covered by the Licensed
Brand; and
(f) At the option of the purchaser, the provision of manufacturing technical
assistance for 3 years.
2. The Baby Cereal Business in Belgium shall not include:
(c) An assignment of the Licensed Brand, since the purchaser shall re-brand the
products covered by the Licensed Brand;
(d) Any right of the licensee of the Licensed Brand to use Blédilac in any country
other than Belgium.
49
SCHEDULE 5 – THE BABY SNACK BUSINESS IN BELGIUM AND
THE NETHERLANDS
1. The Baby Snack Business in Belgium and the Netherlands includes:
(a) the following main intangible assets: the brands Betterfood and LU Vitabis in
Belgium and the brand LU Liga in the Netherlands including all current product
recipes and formulations, the goodwill, and the copyright in the packaging,
advertising and promotional materials used in relation to the products sold under
this brands;
(b) the following customer records: the data on local customers that has been
communicated by PAB to Blédina for baby snacks.
50
SCHEDULE 6 – THE BABY DRINK BUSINESS IN FRANCE AND
BELGIUM
1. The Baby Drink Business includes:
(a) the following main intangible assets:
a. the brand Babysoif in France, including all current product recipes and
formulations, manufacturing know-how, intellectual property rights, together
with the copyright in the packaging, advertising and promotional materials
used in relation to the products sold under this brand for use solely in France;
b. the authorization to use the designation Minibiberon (which is not a registered
trademark in Belgium) solely in Belgium for a period of 5 years, and all
current product recipes and formulations, the goodwill, and the copyright in
the packaging, advertising and promotional materials used in relation to the
products sold under this designation;
(b) After the expiry of the exclusive license for Babysoif and the initial 5-year period
for the product designation Minibiberon, Danone commits to grant the purchaser
a non-exclusive license for the recipes and formulations on an arm’s length basis
at the request of the purchaser;
(c) The following customer records: for Minibiberon, the data on local customers
that has been communicated by PAB to Blédina; for Babysoif, all customer lists
with contact details, overdue lists with details per customer, and credit terms;
(d) a 3-year at cost supply agreement for the products covered by the Baby Drink
Business; and
(e) at the option of the purchaser, the provision of manufacturing technical assistance
for 3 years.
2. The Baby Drink Business shall not include any right of the purchaser of the Baby Drink
Business to use Babysoif and Minibiberon in any country other than France and
Belgium, respectively.
51
SCHEDULE 7 – THE […] BUSINESS
1. The […] Business as operated to date has the following legal and functional structure:
(a) The […] production facility, […]. Except as specified elsewhere in this Schedule,
[…] owns or leases all assets used in the operation of the […] production facility;
(b) the […] Business also includes procurement functions related to the operation of
the […] production facility.
2. The […] Business specifically includes:
(a) the […] production facility located in […], and all machinery and equipment
located therein;
(b) Subject to paragraph 4, all tangible assets used in the development, production,
servicing, and sale of the products manufactured at the […] production facility,
including: all real property; manufacturing assets, including capital equipment,
vehicles, supplies, personal property, inventory, office furniture, fixed assets and
fixtures, materials, on or off-site warehouses or storage facilities, and other
tangible property or improvements; all licenses, permits and authorisations issued
by any governmental organisation;
(c) all contracts, agreements, leases, commitments, and understandings; provided that
for supply contracts not intended exclusively for the […] Business, Numico shall
make its best efforts to facilitate the conclusion of such contracts between the
supplier and the purchaser of the […] Business, at conditions no less favorable
than those offered to Numico;
(d) all customer contracts, lists, accounts, and credit records;
(e) and other records relating to the[…] Business;
(f) all intangible assets that have been used exclusively or primarily in the
development, production, servicing, and sale of the products manufactured at the
[…] production facility and necessary for marketing Numico's IFFO and GUM
products in France, including but not limited to all patents, licenses, and
sublicenses, intellectual property, trademarks, trade names, service marks, service
names, technical information, computer software and related documentation,
know-how, trade secrets, drawings, blueprints, designs, design protocols,
specifications for materials, specifications for parts and devices, safety
procedures for the handling of materials and substances, quality assurance and
control procedures, design tools and simulation capability, and all manuals and
technical information provided to the employees, customers, suppliers, agents or
licensees of the […] Business;
(g) a non-exclusive, non-transferable, royalty-free license(s) for use of any intangible
asset that has been used by both the […] Business and any of Numico’s nondivested
businesses, provided that such license(s) may be transferable to any
future purchaser of the […] Business, and provided further that such license(s)
shall be provided on commercially reasonable terms;
52
(h) all research data concerning historic and current research and development efforts
conducted at or for the […] Business for the French IFFO and GUM markets,
including designs of experiments, and the results of unsuccessful designs and
experiments;
(i) all employees of the […] production facility (amounting to approximately […]
people) (the Personnel); and
(j) the following Key Personnel:
[…]
3. The Divestment Business will also include:
(a) at the option of the purchaser, a supply agreement for liquid GUM by the Parties
([…]) at cost, for a transitional 3-year period; and
(b) an agreement for the supply by the […] production facility to the Parties of
specialized products not included in the IFFO and GUM Milk Business in France
to be divested and currently manufactured by […] for Numico, at cost, for a
transitional 2-year period.
4. The […] Business shall not include:
(c) Any limitation on Numico’s access to tangible or intangible assets that are not
located in the […] production facility and/or used exclusively for the […]
production facility.