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MERGERS: AMO SR approved the merger of the undertakings Arca Capital Slovakia, a.s., and BUKOCEL, a.s.

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On 17 January 2020 the Antimonopoly Office of the Slovak Republic, the Division of Concentrations, (hereafter "the Office") approved a merger grounded in the acquisition of exclusive control of the undertaking Arca Capital Slovakia, a.s., (hereafter "Arca Capital") over the undertaking BUKOCEL, a.s., Hencovce (hereafter "BUKOCEL").
 
The economic group Arca Capital is an investment finance group operating in a wide range of areas. From the point of view of the merger concerned, the energetics is a relevant area, in which it operates mainly through the companies TeHo Topoľčany, s.r.o., Solčany (hereafter "TeHo Topoľčany") and TeHo Bardejov, s.r.o., Solčany (hereafter "TeHo Bardejov"), whose the object of activity is the production and the distribution of heat produced in CHP/RES equipment (equipment for combined production of electricity and heat from renewable energy sources) and the production and the supply of electricity produced in CHP/RES equipment. Heat distribution is located exclusively in the territory of the cities Topoľčany and Bardejov. The input raw material is one of biomass types, namely wood biomass, the so-called dendromass, which is one of renewable energy sources and it is supplied by another subsidiary company - the company ACS BIOMASA, s.r.o., Prešov (hereafter "ACS BIOMASA"). Among undertakings from the group Arca Capital, in the SR there is also the company KMET Handlová, a.s., which operates in the area of heat production and distribution.
 
The company BUKOCEL and its subsidiary companies operate in the areas of the production and the sale of pulp, namely the production and the sale of sulphate pulp, which is a bleached pulp made of a wood mass by a chemical method and of a hard wood, the production and the distribution of heat and electricity produced in CHP equipment and related service and support activities. Neither the company BUKOCEL nor its subsidiary companies use the produced sulphate pulp to produce their own paper products nor other final products.
 
The Office assessed a possible horizontal overlap between the activities of the merging parties in the area of ​​heat production and distribution. From the geographical point of view, it is possible to define this market, also based on the Office's previous decision-making practice, according to the territory of the heat distribution pipeline. Taking into account the areas, where the heat distribution pipelines are located, there is no horizontal overlap between the activities of the merging parties, and therefore the merger concerned does not give a rise to competition concerns in this area.
 
There comes to a horizontal overlap between the merging parties in the area of the production of electricity from renewable energy sources, respectively, with a narrower definition, in the area of the production of electricity of biomass as a type of renewable energy sources. From the information submitted, the Office found out that the electricity production in the company BUKOCEL constitutes only the accessory activity of a negligible importance, since it uses the majority of produced electricity for its own consumption. In the energy sector, the group Arca Capital focuses on heat economy, whereas electricity production is directly linked to heat production, as it is the so-called CHP equipment. For these reasons, the Office came to the conclusion that the merger concerned does not give a rise to competition concerns in this area.
 
Based on the merger notification, the Office evaluated possible vertical interconnections resulting from the merger. In relation to the vertical interconnection of the production of wood waste, which has the character of a wood biomass in the pulp production process in the company BUKOCEL, and its potential use in the process of electricity and heat production in the companies TeHo Topoľčany and TeHo Bardejov (from the group Arca Capital), with regard to the information submitted on the use of wood waste, the Office came to the conclusion that due to the merger concerned there is no likelihood of the restriction of access to inputs (wood waste) for consumers nor the restriction of access to customers (wood waste users) due to the merger concerned.
 
In relation to a possible vertical interconnection of the area of wood mass supply - the company ACS BIOMASA (the group Arca Capital) in relation to pulp production by the company BUKOCEL, the Office found out that ACS BIOMASA currently does not sell wood mass in a quality that would be useful for pulp production. Taking into account mainly the aforementioned, the Office came to the conclusion that due to the merger concerned there is no likelihood of the restriction of access to inputs (supply of wood mass for pulp production) to customers (pulp producers) nor the restriction of access to customers (pulp producers) due to the merger concerned.
 
After evaluating documentation and information obtained, the Office came to the conclusion that the merger assessed is in accordance with the Article 12 Paragraph 1 of the Act on Protection of Competition, as it does not significantly impede effective competition in the relevant market, particularly as the result of the creation or strengthening of a dominant position.
 
The decision came into force on 3 February 2020.