REGULATION (EC) No 139/2004 MERGER PROCEDURE Article 8
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EN This text is made available for information purposes only. A summary of this decision is published in all Community languages in the Official Journal of the European Union. Case No COMP/M.4403 – Thales / Finmeccanica / Alcatel Alenia Space & Telespazio Only the English text is authentic. REGULATION (EC) No 139/2004 MERGER PROCEDURE Article 8 (1) Date: 04/04/2007 COMMISSION OF THE EUROPEAN COMMUNITIES Brussels, 04/04/2007 C(2007) 1507 final PUBLIC VERSION COMMISSION DECISION Of 04/04/2007 declaring a concentration to be compatible with the common market and the EEA Agreement (Case No COMP/M.4403 – THALES/FINMECCANICA/ALCATEL ALENIA SPACE & TELESPAZIO) Commission Decision of 04/04/2007 declaring a concentration to be compatible with the common market and the EEA Agreement (Case No COMP/M.4403 – THALES/FINMECCANICA/ALCATEL ALENIA SPACE & TELESPAZIO) (Only the English text is authentic) (Text with EEA relevance) THE COMMISSION OF THE EUROPEAN COMMUNITIES, Having regard to the Treaty establishing the European Community, Having regard to the Agreement on the European Economic Area, and in particular Article 57 thereof, Having regard to Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings1, and in particular Article 8(1) thereof, Having regard to the Commission's decision of 28 November 2006 to initiate proceedings in this case, After consulting the Advisory Committee on Concentrations2, Having regard to the final report of the Hearing Officer in this case 3, WHEREAS: (1) On 6 October 2006, the Commission received notification pursuant to Article 4 of Regulation (EC) No 139/2004 (“the Merger Regulation”) of a proposed concentration by which the undertaking Thales S.A. (“Thales”, France) and Finmeccanica Società per Azioni (“Finmeccanica”, Italy) acquire within the meaning of Article 3(1)(b) of the 1 OJ L 24, 29.1.2004, p. 1. 2 OJ C ...,...200. , p.... 3 OJ C ...,...200. , p.... 2 Merger Regulation joint control of the undertakings Alcatel Alenia Space SAS (“AAS”, France) and Telespazio Holding srl (“Telespazio”, Italy) by way of purchase of shares in two existing joint ventures to which additional assets are contributed. (2) After examination of the notification, the Commission has concluded that the notified operation falls within the scope of the Merger Regulation and does not raise concerns as to its compatibility with the common market and the EEA Agreement. I. THE PARTIES (3) Thales is a French company active in the development and integration of critical information systems for the defence, aeronautics and transport industries and for civil security. Thales is a company jointly-controlled by TSA (formerly Thomson-SA, a company wholly-owned by the French State) and Alcatel. (4) Finmeccanica is an Italian diversified engineering group active in aerospace, defence systems, energy, communications, transportation and automation. Finmeccanica is a company solely controlled by the Italian State. (5) AAS is a French company jointly-controlled by Alcatel and Finmeccanica, which is active in the design, manufacture and supply of ground and space systems, including satellites and subsystems and equipment for satellites used for telecommunications, earth observation and navigation in the commercial, institutional and military fields. (6) Telespazio is an Italian company jointly-controlled by Alcatel and Finmeccanica, which provides services and end-user applications using or related to satellite-based solutions and products for telecommunications, earth observation, navigation and other application areas in the commercial, institutional and military fields. II. THE OPERATION AND THE CONCENTRATION (7) Through the proposed operation, Thales will acquire Alcatel’s shareholdings in AAS and Telespazio4. In addition, Thales and Finmeccanica will contribute certain of their space activities to AAS or Telespazio. After completion of the operation, Thales and Finmeccanica will jointly control AAS and Telespazio, including the space activities contributed by Thales and Finmeccanica to these two joint ventures, within the meaning of Article 3(1)(b) of the Merger Regulation5. The notified operation thus constitutes a concentration within the meaning of the Merger Regulation. 4 In 2005, Alcatel and Finmeccanica merged their activities related to space systems through the setting up of two joint ventures, AAS and Telespazio. Alcatel and Finmeccanica respectively held 67% and 33% of AAS capital and 33% and 67% of Telespazio’s capital. The creation of the two joint ventures was cleared by the Commission (See Commission decision of 28 April 2005 in Case COMP/M.3680 – Alcatel/Finmeccanica/Alcatel Alenia Space & Telespazio). 5 The proposed transaction does not constitute an internal restructuring of the Alcatel group. Although Alcatel already jointly controls Thales on the one hand and AAS and Telespazio on the other hand, the proposed transaction will also result in the French State, which does not currently have any interests in AAS and Telespazio, acquiring indirect joint control over AAS and Telespazio. 3 (8) In parallel to the notified operation, Thales acquired Alcatel’s activities relating to rail signalling and supervision and systems integration (See Case COMP/M.4337 - Thales/Alcatel Divisions Transport et Systèmes, which was cleared by the Commission on 7 November 2006). As a result, Alcatel’s shareholding in Thales will increase from 9.5% to 21.6%. III. COMMUNITY DIMENSION (9) The undertakings concerned have a combined aggregate worldwide turnover of more than EUR 5,000 million6 (Thales EUR 10,245 million, Finmeccanica EUR 10,799 million, AAS EUR […]* million, Telespazio EUR […]* million). Each of the undertakings concerned has a Community-wide turnover in excess of EUR 250 million (Thales EUR […]* million, Finmeccanica EUR […]* million, AAS EUR […]* million, Telespazio EUR […]* million), but they do not achieve more than two-thirds of their aggregate Community-wide turnover within one and the same Member State. The notified operation has therefore a Community dimension. IV. PROCEDURE (10) The merger was notified on 6 October 2006. (11) Following its market investigation in first phase, the Commission considered that the operation raised serious doubts as to its compatibility with the common market and the EEA Agreement because of the vertical relationship between the upstream market of Travelling Wave Tubes ("TWTs"), which are produced by Thales' wholly-owned subsidiaries Thales Electron Devices, SA France and Thales ED GmbH (together “TED”), and, on the other hand, markets that are downstream of TWTs at two levels (i) Travelling Wave Tube Amplifiers (“TWTAs”) and other TWT-based subsystems such as Microwave Power Modules (“MPMs”), and (ii) satellite prime contracting. In view of the replies of market players, the Commission indeed considered, at this stage of the investigation, that the merger could give rise to an input foreclosure strategy, whereby the new entity would withhold or delay the delivery of TWTs so as to favour its downstream activities in the production of integrated systems (TWTAs and MPMs) and satellite prime contracting7. It also considered, in view of the replies of some satellite prime contractors, that the merger might allow AAS to have access to sensitive confidential information that these prime contractors need to provide to TED as a TWT supplier, and that AAS might subsequently this information to its advantage in satellite prime competitions8. 6 Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission Notice on calculation of turnover under Council Regulation (EEC) No 4064/89 on the control of concentrations between undertakings (OJ C 66, 2.3.1998, p. 25). 7 At recital 83 of the Commission's Article 6(1)(c) decision. 8 At recital 83 of the Commission's Article 6(1)(c) decision. * Parts of this text have been edited to ensure that confidential information is not disclosed; those parts are enclosed in square brackets and marked with an asterisk. 4 (12) Thales submitted a remedy package on 7 November 2006, which was market tested with third parties. This market test indicated that the proposed remedies were not sufficiently clear-cut to remove the serious doubts raised by the Commission, should the competition concerns identified effectively materialise in the future. A revised remedy package was submitted on 21 November 2006, but could not be market tested at such a late stage. In any event, the Commission took the view that the revised set of remedies failed to address in a "clear-cut" way the serious doubts identified in its first phase investigation. (13) The Commission therefore adopted a decision to open an in-depth investigation of the proposed concentration pursuant to Article 6(1)(c) of the Merger Regulation on 28 November 2006 ("the Article 6(1)(c) decision") with a view to assessing the likelihood of input foreclosure, identified in its first phase investigation, post-merger, leading to a significant impediment to effective competition in a substantial part of the common market. (14) In 1998, in relation to the creation of the space joint venture Société Commune de Satellites ("SCS") between Alcatel and Thomson CSF (now Thales), the Commission identified a similar risk of foreclosure as regards the market for satellite prime contracting (due to the link between Thales’ activities in TWTs through its subsidiary TTE (now TED) and SCS’ activities as satellite manufacturer. In the SCS decision9, Thomson CSF committed