CELEX: 31996M0697
Language: en
Date: 1996-03-27 00:00:00
Title: Commission Decision of 27/03/1996 declaring a concentration to be compatible with the common market (Case No IV/M.697 - Lockheed Martin / Loral Corporation) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31996M0697

Commission Decision of 27/03/1996 declaring a concentration to be compatible with the common market (Case No IV/M.697 - Lockheed Martin / Loral Corporation) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 314 , 24/10/1996 P. 0009

  COMMISSION DECISION of 27/03/1996 declaring a concentration to be  compatible with the common market (Case No IV/M.697 - Lockheed Martin /  Loral Corporation) according to Council Regulation (EEC) No 4064/89   (Only the English text is authentic)  The paper version of the decision is available through the sales offices  of the Office of Official Publications of the European Communities.  PUBLIC VERSION  MERGER PROCEDURE  ARTICLE 6(1)(b) DECISION  To the  notifying parties  Dear Sirs,  Subject :<ind> Case No IV/M.697  Lockheed Martin Corporation / Loral  Corporation  <ind> <ind> Notification of 30.01.1996  pursuant to Article 4 of Council  Regulation No 4064/89  1<ind> On 30 January 1996 Lockheed Martin Corporation (LMC) (USA) and  Loral Corporation (Loral) (USA) notified an operation whereby LMC will  acquire sole control of Loral.  On 20 February the Commission declared the  notification incomplete under Commission Regulation 3384/94 art 4(2) [On  the same day the Commission extended the automatic suspension of the  implementation of the operation under Council Regulation (EEC) 4064/89 art  7(2).].  The parties supplied the relevant information on 26 February and  the notification became effective within Commission Regulation 3384/94 art  4(2)  the same day.  2<ind> After examination of the notification, the Commission has concluded  that the notified operation falls within the scope of application of  Council Regulation (EEC) No 4064/89 and does not raise serious doubts as  to its compatibility with the common market and with the functioning of  the EEA Agreement.  <tab> I<ind> THE PARTIES  3<ind> LMC, itself the product of a merger in 1994 between Lockheed and  Martin Marietta, is the largest defence manufacturer in the world.  It  operates particularly in  aeronautics; space and strategic missiles;  electronics; information and technology services; satellite  telecommunications; and energy, materials and environment.  Loral has  extensive defence and electronics businesses and is active in satellite  telecommunications.  It supplies advanced electronic systems, components  and devices in connection with  electronic combat; training and  simulation; tactical weapons; command control, communications and  intelligence;  systems integration;  and communications and space  systems.  <tab> II<ind> THE OPERATION  4<ind> LAC Acquisition Corporation (LAC), a wholly owned subsidiary of  LMC, will purchase all the outstanding common stock and all associated  preferred stock purchase rights in Loral.  LAC will merge with and into  Loral, Loral being the surviving corporation and a wholly owned subsidiary  of LMC.  5<ind> Loral will at closing spin off a new entity, Loral Space &  Communications Ltd (LSCL) (USA), the assets of which will consist  primarily of Loral's satelliterelated assets, liabilities and businesses,  by distributing the voting stock in LSCL to Loral's premerger  stockholders.  LSCL holds an interest of 32.7 pc together with management  rights and significant minority shareholder rights in Space Systems/Loral  Inc (USA), a strategic alliance which supplies satellites in competition  with LMC.  The remaining participants in the strategic alliance are four  European aerospace suppliers each holding 12.25 pc  Aérospatiale (France),  Alcatel (France), Alenia (Italy) and DASA (Germany)  and Lehman  Partnerships 18.3 pc.  By an administrative letter dated 10 April 1995 the  Commission indicated that the strategic alliance fell within the EC Treaty  art 85(1) but that on the information available there was prima facie  sufficient justification for an exemption to be granted under article  85(3).  6<ind> According to the parties the spinoff of LSCL is neither part of the  concentration notified nor a separately notifiable concentration.  There  will however be the following links between LMC and LSCL:  <ind> <ind> Stockholding:  LMC will hold nonvoting preferred stock in  LSCL, representing about half of LSCL's cash assets and convertible into  voting common stock representing 20 pc  the highest single interest  of  the total common stock.  However, standstill provisions incorporated into  the stockholders agreement relating to LSCL impose restrictions upon the  power of LMC to influence the conduct of LSCL.  In particular LMC cannot  increase its shareholding and, even if it converts the preferred stock  into common stock, its ability to influence the composition of the board  of directors and other decisions of the shareholders meeting will be  extremely limited.  The standstill provisions last for seven years or  until specified earlier events which have the effect that the power of LMC  to influence LSCL, even in the absence of those provisions, is  eliminated.  <ind> <ind> Guarantee:  LMC will guarantee up to USD 250 million  indebtedness of Globalstar LP, a supplier of a satellitebased  communications systems in which LSCL has an interest of 33.7 pc.  <ind> <ind> Technical assistance:  LMC will license to LSCL extensive  intellectual property rights, some potentially of long duration, and  supply to LSCL extensive technical services, some of potentially unlimited  duration.  <ind> <ind> Personal links:  Mr Bernard Schwartz, the present chairman and  chief executive officer of Loral, will hold limited stock and important  offices in both LMC and LSCL.  However LMC proposes to exclude him from  participating in decisions concerning satellites.  7<ind> The parties claim that without at least some of these links LSCL  would have inadequate resources to function as an independent supplier and  that the links are counterbalanced by sufficient safeguards to eliminate  the possibility of LMC exercising decisive influence over LSCL.  8<ind> The Commission has considered links similar to the links set out  above in earlier merger cases, in particular IV/M.258  CCIE/GTE .  In the  present case it concludes that the links between LMC and LSCL, as  qualified by the safeguards, are insufficient to confer upon LMC the  possibility of exercising decisive influence on LSCL and thus control of  LSCL within Council Regulation (EEC) No. 4064/89 art 3.  9<ind> It is however possible that the links between LMC and LSCL will  infringe the competition rules of the EC Treaty.  The Commission reserves  its position in relation to this question.  10<ind> The operation notified constitutes a concentration within the  meaning of Council Regulation (EEC) No. 4064/89 art 3(1).  <ind> III<ind> CONCENTRATION OF COMMUNITY DIMENSION  11<ind> LMC has a worldwide turnover in excess of ECU 19 billion and a  Communitywide turnover in excess of ECU 700 million.  Loral has a  worldwide turnover in excess of ECU 5 billion and a Communitywide turnover  in excess of ECU 520 million.  Therefore the parties have a combined  aggregate worldwide turnover in excess of ECU 5000 million and each of  them has a Communitywide turnover in excess of ECU 250 million.  They do  not each achieve more than twothirds of their aggregate Communitywide  turnover within one and the same Member State.  12<ind> The operation therefore has a Community dimension within the  meaning of Council Regulation (EEC) No. 4064/89 art 1(2).  <ind> IV<ind> COMPATIBILITY WITH THE COMMON MARKET  <ind> a)<tab> Relevant product markets  13<ind> The activities of the parties which are the subject of the  operation are largely complementary, LMC specialising in aircraft,  missiles and space systems, Loral specialising in defence electronics.   Both parties supply a wide range of nonsatellite products in Europe.  But  the concentration raises potential competition concerns in relation to  only two of those products, neither of them purely defence products  air  traffic management services and equipment (ATM) and aviation recorder  products.  14<ind> ATM was recognised by the Commission in IV/M.620   ThomsonCSF/Teneo/Indra as a separate product market.  ATM provides full  coverage of an airspace area to ensure the security of the civil air  transport activities.  15<ind> Aviation recorder products (black boxes) are instruments carried  on aircraft to record events leading to a crash.  It is unnecessary to  decide whether aviation recorder products constitute a separate product  market, since, even if they do, no strengthening of a dominant position  will occur as a result of the operation.  <tab> b)<ind> Geographical reference markets  16<ind> In IV/M.620  ThomsonCSF/Teneo/Indra the Commission considered the  geographical market for ATM to be national because of its links with  national security.  It nevertheless recognised the possible effect of  recent developments such as new technology and the new public procurement  rules in the air transport sector (in particular Council Directive 93/38).   For example, in recent years Loral has been awarded contracts for ATM in  the United Kingdom.  Since however on the narrower definition (national)  or the broader definition (at least the EEA) no competition problem arises  in the present case it is unnecessary to define precisely the geographical  market.  17<ind> The Commission considers the market for equipment for civil  aircraft as global as a result of the physical presence of or activities  by the same suppliers throughout the world and the worldwide purchasing  policy of aircraft manufacturers (IV/M.290  Sextant/BGTVDO).  <ind> c)<tab> Competitive assessment  18<ind> For ATM Loral has less than [Deleted for publication : between 10   25 pc] at the EEA level and [between 40  55 pc] at the United Kingdom  level;  but LMC is a very small supplier at a global level and is not  active at all in the EEA.  The concentration therefore produces no  increase in market share at either level.  A dominant position in the  United Kingdom might however result from the combination of the strong  market position of Loral and the substantial resources of LMC.  But after  completing its enquiries in relation to the United Kingdom market the  Commission is satisfied that other equally powerful suppliers operate or  are capable of operating in the market and that no dominant position will  occur in consequence of the operation.  19<ind> For some aviation recorder products Loral has a global market  share of up to [between 55  70 pc].  In 1994 LMC ceased the manufacture of  these products and terminated all active sales efforts.  Apart from  fulfilling a small number of existing orders and repairing and supplying  spares for products already sold LMC has ceased to be active in this  market.  Accordingly no addition of market share results from the  concentration.  Again the Commission is satisfied that no dominant  position will result from the operation.    <ind> VI<ind> CONCLUSION  20<ind> For the foregoing reasons, the proposed concentration does not  raise serious doubts as to its compatibility with the common market and  with the functioning of the EEA Agreement.  <ind> For the above reasons, the Commission has decided not to oppose the  notified operation and to declare it compatible with the common market and  with the functioning of the EEA Agreement. This decision is adopted in  application of Article 6(1)(b) of Council Regulation No 4064/89.  For the Commission,