EU Mergers

Phase I Mergers

  • M.8445 DUFERCO ENERGIA / ENERGHE (18 April 2017)

EU Competition 

Commission conditionally clears acquisition of ITP by Rolls-Royce. On 19 April 2017, the European Commission (Commission) cleared the proposed acquisition of ITP by Rolls-Royce, subject to conditions. Aircraft engine maker, Rolls-Royce, and aircraft engine components maker, ITP, are both members of the military engine consortium, Europrop International GmbH (EPI). The Commission was concerned that by acquiring ITP, Rolls-Royce would obtain a greater influence over the decision-making process of the EPI consortium. In order to address the Commission’s concerns, Rolls-Royce offered commitments relating to the EPI governance rules which would eliminate any conflict of interest and ensure the EPI consortium remained competitive. The Commission also considered whether the combined entity would be able to restrict the supply of ITP’s engine components to other engine manufactures which compete with Rolls-Royce. However, the Commission found that Rolls-Royce would not have the ability or the incentive to do so. The Commission concluded that if the transaction was modified by the proposed commitments, it would not give rise to competition concerns.

Commission conditionally clears acquisition of Morpho by Advent International. On 19 April 2017, the Commission cleared the proposed acquisition of Morpho by private equity firm Advent International, subject to conditions. Morpho is an identity and security solutions provider based in France and Advent International controls smart card and digital security provider, Oberthur. Both Morpho and Oberthur develop security solutions such as smart cards for the banking, telecommunication, and identity document sectors. The Commission found that in France there are currently only three viable suppliers of smart cards who hold the required national certificates to supply French banks. This transaction would reduce the number to two and, as a result, significantly reduce competition in the market for payment smart cards in France. In order to address the Commission’s concerns, the parties offered to divest Morpho’s French subsidiary, CPS, which supplies payment smart cards in France. The Commission was satisfied that this remedy would address their concerns and therefore concluded that the transaction, as modified, would not significantly reduce competition.

State Aid

Commission endorses reform of the UK Horserace Betting Levy scheme. On 21 April 2017, the Commission endorsed the reform of the UK Levy scheme on horserace betting in line with EU state aid rules. Currently only bookmakers based in the UK contribute to the financing of horse racing, however, the reform will subject off-shore bookmakers to the levy as well. The reform will establish a 10% levy on the Gross Gambling Yield applied to all betting operators for any amount they make above the de minimis threshold of £500,000 per year. The Commission recognised that the measures were essential to help improve horse breeding and horseracing and to create a more level playing field among betting operators without unduly distorting competition. Furthermore, the de minimis threshold supports the entry of new betting operators and the development of competition. Therefore, the Commission decided to approve the measures.          

UK Competition

CMA accepts undertakings given by AMC in the acquisition of Odeon and UCI Cinemas. On 19 April 2017, the Competition and Markets Authority (CMA) accepted undertakings in lieu of referring the completed acquisition of Odeon and UCI Cinemas Holdings Limited (Odeon) by AMC (UK) Acquisition Limited (AMC) to a Phase 2 investigation. AMC operated a 16-screen multiplex in Manchester, namely the AMC Great Northern, and Odeon operated several cinemas in Manchester including a 20-screen multiplex at the Odeon Printworks. The AMC Great Northern and Odeon Printworks cinemas were close competitors. On 8 December 2016, the CMA decided that unless appropriate undertakings were offered, it would refer the transaction to a Phase 2 investigation because the CMA believed the merger may result in a substantial lessening of competition in the market for cinema exhibition services in Manchester. In order to remedy the CMA’s concerns, AMC offered to divest the business of Odeon in Manchester carried on from the Odeon Printworks site to a proposed purchaser, Vue Entertainment Limited. The CMA found that this was sufficient to remedy its concerns and therefore accepted the undertakings. The divestment must be completed within one month from 19 April 2017.      

CMA extends Phase 1 investigation of the anticipated acquisition of Punch Taverns by Heineken. On 19 April 2017, the CMA published a notice extending its preliminary assessment of the anticipated acquisition of Punch Taverns Holdco (A) Limited (Punch Taverns) and Heineken UK Limited (Heineken). Previously on 12 April 2017, the CMA had issued a notice to Heineken under section 109 of the Enterprise Act 2002 which required Heineken to provide certain information and documents. The deadline for this was 10am on 19 April 2017. The information and documents were not provided to the satisfaction of the CMA by the deadline, therefore, Heineken failed to comply with the notice. The CMA has consequently extended the preliminary assessment period until Heineken can provide the required information and documents.