EC approves Outokumpu acquisition of ThyssenKrupp Inoxum
Following an in depth review, the European Commission has cleared under the EU Merger Regulation the proposed acquisition of Inoxum, the stainless steel division of ThyssenKrupp of Germany, by the Finnish stainless steel company Outokumpu.
The approval is conditional upon the divestiture of Inoxum's stainless steel production facility in Terni, Italy.
The Commission had concerns that the combination of the two largest suppliers of cold rolled steel products would have given the merged entity the power to raise prices. The commitments offered address these concerns.
Joaquín Almunia, Commission Vice President in charge of competition policy, said “Stainless steel is a key material for a wide range of products, from household goods to industrial equipment, and an essential input for many European industries. The divestment of the Italian Terni plant ensures that the creation of a new European market leader will not be detrimental for consumers and businesses in Europe.”
The Commission's in-depth investigation focused on the production of cold rolled stainless steel products in the European Economic Area (EEA). In this market, the merger will combine the first and the second largest supplier. The transaction, as initially notified, would have created a player three times as big as Aperam of Luxembourg and five times as big as Acerinox of Spain, the closest competitors and respectively the third and fourth player in the market.
The Commission's investigation found that while imports account for an appreciable part of the EEA market, they are insufficient to constrain price increases, because they are generally not considered fully substitutable by final customers. Moreover, despite their level of spare capacity, it is likely that the two main European competitors of the parties, Aperam and Acerinox, would have found it more profitable to follow price increases by the merged entity rather than competing sufficiently aggressively to prevent them. Price increases resulting from the transaction, as initially notified, would have likely been much higher than any potential synergies.
In order to address these concerns, the parties offered to divest Inoxum's stainless steel plant in Terni and a number of distribution centres in Europe. The divestment will provide the purchaser with a fully integrated, stand-alone production and distribution business, having access to all major EEA countries. At the option of the purchaser, the divestment will include Terni's forge (Societa' delle Fucine) and the large bright annealing line LBA2. The Commission will make sure that this business is sold to a suitable purchaser, as provided in the EU Merger Regulation, and will check that Terni's viability and competitiveness is ensured.
The proposed commitments ensure that the merged entity will continue to face a sufficient competitive constraint in the market for the production of cold rolled stainless steel products in the EEA. The Commission therefore concluded that the proposed transaction, as modified by these commitments, would not raise competition concerns. The decision is conditional upon full compliance with the commitments.
The proposed transaction was notified to the Commission for regulatory approval on 10 April 2012. On 21 May 2011, the Commission opened an in-depth investigation (see IP/12/495). The parties were advised in a statement of objections adopted on 9 August 2012 that the merger, as initially notified, raised serious competition concerns in the markets for the production of cold rolled stainless steel products.
The Commission's investigation found that the proposed transaction would raise no competition concerns for the production of slabs, hot rolled stainless steel products, precision strip and ferrochrome. The Commission also concluded that transaction would not raise concerns with regard to the distribution of stainless steel products.
Source - ec.europa.eu