Mergers: Commission approves Varta AG’s acquisition of Energizer’s divestment business, subject to conditions


(Frank Wang, Unsplash)

This article is brought to you in association with the European Commission.

The European Commission has approved, under the EU Merger Regulation, Varta AG as a suitable purchaser of assets divested by Energizer in order to acquire Spectrum Brands’ batteries and portable lighting business. The Commission also approved Varta AG’s acquisition of the divested assets under EU merger rules, subject to conditions.

In December 2018, the Commission approved the acquisition of Spectrum Brands’ batteries and portable lighting business by Energizer, subject to conditions. In particular, Energizer was required to sell its business of Varta-branded and unbranded household and specialty batteries to a suitable purchaser. The divestiture was proposed by Energizer to address the Commission’s concerns that the combination of Energizer and Spectrum would have significantly reduced competition in a number of countries in the European Economic Area (EEA) in several branded product markets for batteries and portable battery chargers.

The package of assets that Energizer offered to divest consists of Spectrum’s entire activities in Varta-branded and unbranded household and specialty batteries, chargers and portable lighting, in Europe, Middle East and Africa (EMEA). Energizer also committed to enter into an exclusive supply and licence agreement with the purchaser concerning the sale of Rayovac-branded hearing aid batteries to mass retailers in EMEA.

Energizer notified to the Commission that Varta AG would purchase the assets.

The Commission has taken two decisions today concerning the sale of these assets by Energizer to Varta AG:

  • It has found that Varta AG is a suitable purchaser of the Energizer assets, allaying the Commission’s concerns in the European markets for branded product markets for batteries and portable battery chargers.
  • It has approved under the Merger Regulation Varta AG’s acquisition of the assets sold by Energizer, subject to certain obligations. The Commission concluded that certain commitments were necessary to approve the transaction with respect to Hearing Aid Batteries sold in the mass retail channel.

Approval of Varta AG as a suitable purchaser and commitments in relation to hearing aid batteries

The Commission initially had prima facie concerns about the proposed acquisition by Varta AG with respect to hearing aid batteries sold in the mass retail channel. In particular, Varta AG is active on the upstream market for the manufacturing and wholesale supply of hearing aid batteries to battery brands whilst the divested Varta business is a leading downstream supplier supply of branded hearing aid batteries to the mass retail channel.

Following the investigation, the Commission was concerned that customers, which will in the future compete with Varta AG in the downstream market, may face the risk of being shut out from that market, or face higher prices, lower quality and less choice. This is because those customers rely on Varta AG’s supplies of batteries upstream to compete against Varta in the downstream market. The possibility to source batteries from alternative manufacturers to Varta AG was found not to be a suitable alternative in the short term.

In order to address these concerns, Varta AG proposed to globally supply hearing aid batteries to any company currently or potentially active in the wholesale supply of hearing aid batteries under their own brand under certain conditions for a set period of time.

This should ensure that downstream competitors do not face disruptions, higher prices or reduced quality in the supply of hearing aid batteries they offer to customers while they develop alternative sourcing options. The commitments also allow other companies to enter the market relying on similar supply conditions from Varta AG.

These commitments fully address the Commission’s competition concerns.Therefore, the Commission concluded that the proposed transaction, as modified by the commitments, would no longer raise competition concerns in the EEA. The Commission’s decision is conditional upon full compliance with the commitments.

On this basis, the Commission cleared the acquisition of the Varta business and approved Varta AG as a suitable purchaser.

The Companies

Varta AG, based in Germany, is active in the development, production, sale, research and development of microbatteries and energy storage solutions, for use within a variety of applications and end user markets.

Energizer, based in the US, manufactures and markets consumer batteries sold under the Energizer and Eveready brands, as well as branded portable battery chargers and lighting products.

Merger control rules and procedure

The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.

If the Commission identifies competition concerns, it is for the merging companies to choose which assets they want to offer as a remedy in order to address the concerns.

Following the conditional clearance of the acquisition of Spectrum by Energizer, it was the responsibility of Energizer to find and propose to the Commission a suitable purchaser within the time period indicated in the commitments.

To ensure that the divestiture solves the competition concerns, the Commission assesses the suitability of a proposed purchaser according to the purchaser criteria set out in the text of the commitments. The Commission only accepts the proposed buyer when it is convinced that the buyer has the ability and incentive to continue to operate the divested assets in the future in a way that they will constitute a competitive force on a lasting basis in the market.

The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).

More information will be available on the Commission’s competition website, in the public case register under the case numbers M.8988 and M.9449.

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