EC approves acquisition of Asco by Spirit, subject to conditions
Staff Writer |
The European Commission has approved, under the EU Merger Regulation, the acquisition of Asco by Spirit.
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Both companies are active in the aerospace equipment industry worldwide.
The approval is conditional on full compliance with commitments offered by Spirit.
Spirit and Asco are both active in the aerospace equipment industry worldwide.
Both companies supply aerostructures, which are components for wings, fuselage, and nacelles, for aircraft manufacturers such as Airbus and Boeing.
The Commission's investigation found that the proposed merger would raise no competition concerns regarding vertical supply relationships or horizontal overlaps in the same markets because:
- in markets where the companies' activities overlap for example,on a very broad market for wing aerostructures, Spirit and Asco are not close competitors, and the merged entity will continue to face strong competition from other suppliers;
- in markets where the companies' activities are at different levels of the supply chain, the merged entity would have neither the ability nor the incentive to shut out competing suppliers or customers.
However, the Commission was concerned that the proposed acquisition, as originally notified, would significantly reduce competition in the worldwide market for the supply of slat systems in general and of slats in particular.
This is because the proposed merger would have increased the likelihood of companies in this market being able to coordinate their behaviour (so-called “coordinated effectsâ€).
Slat systems allow the wing of an aircraft to operate at a higher “angle of attack†(i.e., the angle at which the wing meets oncoming air).
This improves the lifting ability of the wing and enables aircraft to fly at lower speeds, during take-off and landing.
Slat systems include several components such as slats, slat supports, and racks and pinions.
Spirit and Asco operate at different levels of the supply chains for slat systems.
Asco is a member, together with Sonaca and BMT Eurair, of a joint venture named Belairbus.
Through Belairbus, the three parent companies participate in the development and production of slat systems for all the main commercial Airbus planes.
The joint venture manages the commercial, financial and administrative aspects of contracts for the supply of slat systems to Airbus.
Sonaca, one of Asco's partners in Belairbus, is also a leading supplier of slats and the only competitor of Spirit in this market.
Therefore, by acquiring Asco, Spirit would have also become a shareholder of Belairbus, alongside its sole competitor for slats, Sonaca.
The Commission was concerned that, following the transaction, Belairbus would become a vehicle for increased transparency between the companies and would increase the likelihood of coordinated behaviour between Spirit and Sonaca, the only two worldwide suppliers of slats.
This would have had negative effects on competition for manufacturing and supply of slats, and slats systems as a whole, to the detriment of Airbus and other aircraft manufacturers sourcing slats worldwide.
The Commission's concerns related to the operation of the Belairbus Joint Venture, which would enable coordination between its participants.
To address the Commission's competition concerns, Spirit offered to structurally modify the set-up of Belairbus to permanently eliminate its role as a commercial and technical platform for negotiations with Airbus.
As a result, all future contract negotiations will be carried out bilaterally and independently between each supplier and Airbus.
As a supplementary commitment, the companies have set up mechanisms to destroy any existing commercially sensitive information of Sonaca held by Asco, so this will not be transferred to Spirit after the transaction.
The flow of Sonaca's commercially sensitive information will be structurally cut off for the future.
On this basis, the Commission concluded that the proposed acquisition, as modified by the commitments, would no longer raise competition concerns.
The decision is conditional upon full compliance with the commitments. ■