CELEX: 31996M0767
Language: en
Date: 1996-07-29 00:00:00
Title: Commission Decision of 29/07/1996 declaring a concentration to be compatible with the common market (Case No IV/M.767 - Thomson / CSF / Finmeccanica / Elettronica) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31996M0767

Commission Decision of 29/07/1996 declaring a concentration to be compatible with the common market (Case No IV/M.767 - Thomson / CSF / Finmeccanica / Elettronica) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 310 , 19/10/1996 P. 0009

 COMMISSION DECISION of 29/07/1996 declaring a concentration to be  compatible with the common market (Case No IV/M.767 - Thomson / CSF /  Finmeccanica / Elettronica) 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.767  ThomsonCSF/Finmeccanica/Elettronica <ind> <ind> <ind> Notification of 02.07.1996 pursuant to Article 4 of  Council Regulation  No 4064/89 1.<ind> The notified operation consists in the acquisition by THOMSONCSF,  a subsidiary of the French company THOMSON SA (THOMSON), of 26.66% and  subsequently 33.33% of the capital stock of ELETTRONICA, a company  currently owned by FINMECCANICA, Mr FRATALOCCHI and Mr BENIGNI. 2.<ind> After examination of the notification, the Commission has  concluded that the notified operation falls within the scope of  application of Council Regulation No.4064/89 and does not raise serious  doubts as to its compatibility with the common market and the functioning  of the EEA Agreement. I.<ind> THE PARTIES 3.<ind> THOMSON is a holding company controlled by the French State, with  two main subsidiaries. Thomson Multimedia is active in the design,  development and manufacture of consumer electronic products. ThomsonCSF is  active in professional electronics and defence systems. 4.<ind> FINMECCANICA is a major diversified technologybased Italian  engineering company and is presently active in five core business areas:  aerospace, defence systems, energy transportation and automation.  FINMECCANICA is controlled by Istituto per la Ricostruzione Industriale  SpA (IRI) but has to be considered as "an economic unit with an  independent power of decision" according to Recital 12 of the Merger  Regulation [See Commission Decision of 02.08.1994 in Case N  IV/M.496   Marconi/Finmeccanica, point 5.]. 5.<ind> Mr Filippo FRATALOCCHI and Mr Enzo BENIGNI are individual  shareholders of ELETTRONICA. They do not have any controlling interest in  any other company involved in the same field of activity as ELETTRONICA. 6.<ind> ELETTRONICA is mainly dedicated to the design and manufacture of  electronic warfare systems and equipment. It is also presently active in  space electronics, environmental monitoring systems and TV broadcasting  equipment. II.<ind> THE OPERATION 7.<ind> The parties have agreed that Thomson will hold 26.66% of the  capital stock of Elettronica after a first capital increase and 33.33% of  the capital stock of Elettronica after a second capital increase. Such  second capital increase shall take place after the closing related to the  first capital increase. The agreements also include put and call options,  the result of which on the structure of control should be analysed if and  when these options are exercised. <ind> The proposed concentration is structured in an Agreement among  ThomsonCSF, Finmeccanica, Mr Fratalocchi and Mr Benigni which includes a  Shareholders Agreement between the same parties and a Coordination  Agreement between a wholly owned subsidiary of ThomsonCSF and  Elettronica. III.<ind> CONCENTRATION <ind> Joint Control 8.<ind> According to the terms of the Agreement, Thomson will have a veto  right on the appointment of the Managing Director and of the General  Manager who will be jointly proposed by Finmeccanica, Mr Fratalocchi and  Mr Benigni [The four shareholders have agreed that the current Managing  Director will remain in office until the general shareholders assembly  which shall approve the 1997 accounts.]. After the second capital  increase, the Senior Financial Manager will be appointed by the General  Manager with the agreement of Thomson. Furthermore, important matters  dealt with at the Board of Directors or at the Shareholders Assembly are  subject to the joint approval of  Thomson, Finmeccanica, Mr Fratalocchi  and Mr Benigni. Such important matters include the annual approval of  strategic plans and budget plans [ Deleted, business secret.]. Finally,  the Coordination Agreement provides for products rationalization,  coordination for procurement policy outside France and Italy and for  European programs and general technological, industrial and production  coordination and rationalization between Thomson and Elettronica. A  Coordination Committee comprising two members appointed by Elettronica and  two members appointed by Thomson will decide by unanimity in the  abovementioned fields. Itfollows that Elettronica will be jointly  controlled by Finmeccanica, Mr Fratalocchi, Mr Benigni and Thomson. <ind> Concentrative joint venture 9.<ind> Elettronica currently operates as an autonomous economic entity  with its own assets, staff, management, intellectual property rights, etc  and will continue to do so under the present arrangements. The agreements  have no time limit except the Coordination Agreement which has a five year  duration. 10.<ind> No coordination of competitive behaviour between Thomson,  Finmeccanica, Mr Fratalocchi and Mr Benigni will result from this  operation. Mr Fratalocchi and Mr Benigni are only present in the field of  activity of Elettronica through their stake in this company.  Finmeccanica's activities in electronic warfare apart from its stake in  Elettronica can be considered as de minimis as they are limited to Elmer,  which is jointly owned by Finmeccanica and Marconi and represents  [Deleted, business secret.  Read "Only a minimum part of the market  concerned".] of the Italian electronic warfare market. Finally, Thomson is  not present in electronic warfare in Italy. The operation is therefore a  concentration within the meaning of Article 3 of the Merger Regulation. IV.<ind> COMMUNITY DIMENSION 11.<ind> The undertakings concerned have a combined aggregate worldwide  turnover in excess of 5 billion ECU. Both Thomson and Finmeccanica have a  Communitywide turnover in excess of 250 million ECU. Thomson does not  achieve more than twothirds of its aggregate Communitywide turnover within  one and the same Member State. The notified operation therefore has a  Community dimension.  V.<ind> COMPATIBILITY WITH THE COMMON MARKET 12.<ind> Elettronica is present in the following sectors: <ind>  electronic warfare, <ind>  environmental monitoring equipment, <ind>  space electronics, <ind>  TV broadcasting equipment and systems. 13.<ind> As regards environmental monitoring equipment, space electronics  and TV broadcasting equipment and systems, the competitive impact of the  transaction is nonexistent or insignificant, either because there is no  overlap between the activities of the parties (environmental monitoring  equipment) or because Elettronica's activities are very limited (space  electronics: turnover amounting to ECU 1.5 million; TV broadcasting  equipment and systems: 1% market share at EU level and 3% market share on  a worldwide basis). Furthermore Elettronica has undertaken under the  Agreement to sell or dispose of its environmental monitoring equipment and  TV broadcasting equipment and systems businesses.   <ind> Electronic warfare 14.<ind> Electronic warfare equipment and systems are defence products  which involve the use of electromagnetic and directed energy in order to  mainly determine, exploit, reduce or prevent hostile use of the  electromagnetic spectrum. They enable armies to detect the existence of  and identify enemy communications, to analyse their content or direction  and to jam them. In previous decisions, the Commission has considered  electronic warfare as a separate product market [See Commission Decisions  of 5.9.1994 in Case N  IV/M.496 Marconi/Finmeccanica, point 27 and of  22.8.1995 in Case N  IV/M.620 ThomsonCSF/Teneo/Indra, point 32]. <ind> General outline for defence products [See Commission Decision of  22.8.1995 in Case N  IV/M.620 ThomsonCSF/Teneo/Indra, point 26] 15.<ind> Markets for defence products and services tend to remain national  where a domestic supplier exists [Notwithstanding a certain movement  towards a wider European market as a result of common defence programmes  and European alliances. On these questions, see Commission Decision of  2.12.94 in Case No IV/M.527Thomson CSF/Deutsche Aerospace, point 25 ].  However, where there is no domestic supplier, then, subject to other  barriers such as export restrictions and national preferences, there is  usually international competition between suppliers of defence products  and services from different countries [ See for instance Commission  Decision of 14.4.1993 in Case No IV/M.318Thomson/Shorts, point 23]. In the  present case therefore the affected markets are principally France and  Italy. In this context, it should be stressed that Thomson on one hand,  and Finmeccanica and Elettronica on the other hand, are operating in  different geographic markets. Furthermore, asto the Italian electronic  warfare market, there is only a minimum overlap between Elettronica's and  Finmeccanica's activities due to the Finmeccanica's joint control of  Elmer, whose current market share is about [Deleted, business secret.   Read: not significant.]. Finally, the operation does not materially modify  the present structure of national markets since the possibility for other  strong competitors and new entrants to expand or enter the markets remains  basically unchanged. <ind> When assessing the market position of a firm in the defence  industry, account must be taken of the bargaining power of its main  client(s): the ministry of defence (MOD) of the State(s) concerned [See  for instance Commission Decision of 24.3.1995 in Case No  IV/M.571CGI/Dassault, point 19]. In recent years, MODs, which generally  formulate the operational requirements and technical specifications of  armaments, have been successful in keeping down market prices. As a  consequence of the reduction in national defence budgets, there is a  tendency for the MODs to require higher technical specifications with  lower levels of manpower and lower overall costs and to be reluctant to  bear the risks associated with R&D. Finally, the general views of the MOD  concerned is also of relevance for the assessment of an operation in the  defence industry [ See for instance the Report of the Science Board Task  Force on Antitrust Aspects of Defense Industry Consolidation. April 1994.  Office of the Under Secretary of Defense for Acquisition & Technology of  the United States ]. In the present case, it should be noted that the  Italian MOD, to which a questionnaire has been sent by the Commission, has  not raised on any objection to the operation. <ind> Assessment 16.<ind> The present operation does not lead to the strengthening or the  creation of a dominant position in the electronic warfare. Before the  operation, Thomson was not present in Italy and Elettronica not present in  France. In both countries, and despite a high market share especially of  Elettronica ([ Deleted, business secret.] together with Elmer's market  share) in Italy, there exists effective competition. In Italy, the  electronic warfare programmes have been assigned with reference to the  origin of the platform: in this context, competitors of Elettronica  include [Deleted, business secret.  Five major firms.]. In France, Thomson  has to face [Deleted, business secret. Four major firms together.] and, to  a lesser extent, [Deleted, business secret. Four major firms  together.](14). Finally, the combined presence of Thomson and Elettronica  does not exceed [Deleted, business secre](12) in any other Member State  except in Spain, where Thomson jointly controls Indra but where  Elettronica is only marginally present (turnover of ECU 0.2 million). VI.<ind> CONCLUSION 17.<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,