HCJI Holdings G.K. — Combination C-2022/03/916

Notice under Section 6(2) of the Competition Act, 2002 given by HCJI Holdings G.K., Citrus Investment LLC, HCJ Holdings 2 G.K., Japan Industrial V GP K.K., Manaslu Partners III Ltd., Primrose Hill Partners II Ltd., Shepherds Hill Partners III Ltd. and Sonora Partners III Ltd.

CORAM: Mr. Ashok Kumar Gupta Chairperson

Ms. Sangeeta Verma Member

Mr. Bhagwant Singh Bishnoi Member

Order under Section 31(1) of the Competition Act, 2002

1. On 25th March 2022, the Competition Commission of India (Commission) received a notice (Notice) under Section 6(2) of the Competition Act, 2002 (Act), given by HCJI Holdings G.K. (HCJI)1, Citrus Investment LLC (Citrus/Investment Company)2, HCJ Holdings 2 G.K. (HCJ Holdings/HCJ HD2), Japan Industrial V GP K.K. (JI-GP), Manaslu Partners III Ltd. (Manalsu), Primrose Hill Partners II Ltd. (Primrose GP), Shepherds Hill Partners III Ltd. (Shepherds) and Sonora Partners III Ltd. (Sonora). Hereinafter, HCJI, Citrus, HCJ Holdings, JI-GP, Manalsu, Primrose GP, Shepherds and Sonora are collectively referred to as the Acquirers.

1 Notice was initially filed by HCJI. In response to a query, Citrus, HCJ Holdings,JI-GP, Manalsu, Primrose GP, Shepherds and Sonora became the new ‘New Notifying Parties’ 2 Citrus is a wholly owned subsidiary of ITOCHU Corporation.

2. The Notice was given pursuant to execution of Share Purchase Agreement (SPA) dated 14th January 2022 inter alia between Hitachi, Ltd. (‘Hitachi Parent/Seller’) and HCJI, Manaslu Fund III L.P. (Manaslu LP), Sonora Fund III, L.P. (Sonora LP), Shepherds Hill Fund III, L.P. (Shepherds LP), Primrose Hill Fund II, L.P. (Primrose), Japan Industrial Partners V Investment, Limited Partnership (JIP V Investment), Japan Industrial Partners V Parallel Investment, Limited Partnership (JIP V Parallel) and ITOCHU Corporation (Itochu) and Capital Alliance Agreement dated 14th January 2022 inter alia between Hitachi Parent and HCJI.

3. The proposed combination relates to acquisition of 26% in Hitachi Construction Machinery Co., Ltd (HCM/ Target) from Hitachi Parent through HCJI by Citrus, and HCJ Holdings on a fully diluted basis. Acquirer has submitted details regarding Interconnected Transaction under regulation 9(4) of the (Procedure in regard to the transaction of Business relating to Combinations) Regulations, 2011 (Combination Regulations), wherein HCJ Holdings would receive cash contributions from JI-GP, Manaslu, Primrose GP, Shepherds and Sonora (collectively, “Fund Entities”) through their Funds, i.e. JIP V Investment, JIP V Parallel, Manaslu LP., Primrose, Shepherds LP, and Sonora LP. (Hereinafter referred to as Proposed Combination). Acquirers and Target are collectively referred to as Parties.

4. The Commission vide its communication dated 18th April 2022, issued under Regulation 14(3) of the Combinations Regulations, 2011, required the notifying party to remove defects in the Notice and furnish certain information relevant for the purpose of assessment of the Proposed Combination. Notifying Parties submitted their response vide submission dated 20th May 2022.

ACQUIRERS

5. HCJI: HCJI is a wholly owned subsidiary of Japan Industrial Partners Holdings Inc. (JIP HD). HCJI was established as a limited liability company to hold shares in the Target and undertake all business incidental to the same. Currently, HCJI is jointly held on 50:50 basis by (a) Citrus; and (b) HCJ Holdings and post the Proposed Combination it will change its corporate form limited liability company to a stock company. HCJI does not have any subsidiaries/ investee companies active in India.

6. Itochu Corporation (Itochu): Itochu is the holding company of Citrus. Itochu does not have any subsidiaries/ investee companies active in India. Itochu is present in India by way of import of construction machinery spare parts (i.e., control valves) to a certain OEM, as a part of its trading company operations as a logistics arrangement and finance of construction machinery parts, manufactured by a Japanese supplier of control valves to the OEM. Itochu had certain shareholding in a construction machinery company in India. However, Itochu had no substantial right for management of the Indian entity (or representative) of Japanese construction machinery company and its business in India.

7. Citrus: Citrus is a 100% subsidiary of Itochu and has been incorporated for the purpose of making capital contributions to HCJI for the Proposed Combination.

8. HCJ Holdings: HCJ Holdings is a newly established Japanese special purpose company created to which two Japanese funds and four Cayman funds will make cash contributions. None of the six funds can exercise any individual veto/affirmative rights over HCJ HD2 apart from Primrose.

9. Primrose: Primrose is a fund managed by Primrose GP primarily. It is engaged as a private equity fund and holds 44.96% shares (and voting rights), with limited veto rights with regards to the amendment of the articles of association and memorandum of association in HCJ HD2.

10. JI-GP: JIP, a wholly-owned subsidiary of JIP HD, manages and operates JI-GP. JI-GP is a private company and is involved in the management of the two Japanese Funds, i.e. JIP V Investment and JIP V Parallel which provide investment funding. JIP HD is the ultimate parent entity of JI-GP. JI-GP is the general partner of JIP V Investment and JIP V Parallel.

11. Manaslu, Primrose GP, Sonora and Shepherds: Manaslu, Primrose GP, Sonora and Shepherds are private companies which provide investment funding as the general partner for Manaslu LP, Primrose, Sonora LP and Shepherds LP respectively.

TARGET

12. HCM: HCM is listed on the Tokyo Stock Exchange. Its major shareholder and controlling parent company is Hitachi Parent. It is a construction equipment company which is engaged in the manufacturing, sales and service of mining and construction machinery, transportation machinery, and other machines and devices. It has no direct operations in India and is primarily involved in the manufacture and sale of construction machinery in India through the following subsidiaries and affiliates:

a) Tata Hitachi Construction Machinery Company Pvt. Ltd (Tata-Hitachi): It is a company incorporated in India. Its shareholding comprises Tata Motors Limited (39.742%) and HCM (60.004%) and others (0.254%). Tata-Hitachi is involved in the business of manufacture and sale of construction machinery, attachments and spare parts as well as rental equipment and used equipment business in India.

b) H-E Parts International LLC (H-E Parts): It is a subsidiary of the Target and does not have a legal entity or any inventory in India.

c) Bradken India Private Limited (Bradken India): It is a wholly-owned subsidiary of Bradken Pty. Limited, an entity which is in-turn wholly-owned by HCM. Bradken India manufactures and supplies equipment and castings for use in the mining and energy industries. (Hereinafter, Tata-Hitachi, H-E Parts and Bradken India are collectively referred to as Target’s Subsidiaries).

13. HCM through its Subsidiaries in India is engaged in the manufacture and sale of construction machinery in India. However, with respect to Itochu, its shareholding in the Indian entity of the Japanese construction machinery company has ceased to exist as of April 2022. Itochu’s limited business activity in relation to construction machinery in India at present is in terms of trade of spare parts (i.e., control valves) for an OEM as part of its trading company operations. It has been submitted that none of the New Notifying Parties (including through their respective Funds) have any existing or potential horizontal overlap / vertical overlap or complementary relationships with the activities of the Target.

14. The Commission decided to leave the precise delineation of the Relevant Market open in the present case as it is observed that the Proposed Combination is not likely to cause any appreciable adverse effect on competition in any of the plausible relevant market(s) in India.

15. It has been clarified that Itochu does not manufacture the spare parts traded by it to the certain OEM, with the spare parts being manufactured by the Japanese supplier of control valves. Itochu does not engage in sale of any other spare parts for construction machinery to any other entity apart from the certain OEM, to which it only trades the limited spare parts (i.e., control valves) manufactured by the Japanese supplier of control valves. The nature of bespoke spare parts (i.e., control valves) cannot be used by any another OEM (such as Tata-Hitachi); and Itochu is merely facilitating the supply of the spare parts in its capacity as a trading company. The Target (and its subsidiaries/affiliates) in India do not involve any trading entity (like Itochu) for procurement of its spare parts. The turnover from the supply contract of control valves manufactured by the Japanese supplier of control valves to the certain OEM amounted to less than 0.01% of Itochu’s revenue for F.Y. 2020- 21. The vertical/complementary overlaps are not such as to create any foreclosure concerns in India.

16. Considering the facts on record including details provided in the Notice given under Section 6(2) of the Act and assessment of the Proposed Combination based on the factors stated in Section 20(4) of the Act, the Commission is of the opinion that the Proposed

Combination is not likely to have any appreciable adverse effect on competition in India in any of the relevant market(s) and therefore, the Commission hereby approves the same under Section 31(1) of the Act.

17. This order may be revoked if, at any time, the information provided by the notifying parties are found to be incorrect.

18. The information provided by the notifying parties are confidential at this stage in terms of and subject to the provisions of Section 57 of the Act.

19. The Secretary is directed to communicate to the notifying parties accordingly.