CELEX: 31992M0290
Language: en
Date: 1992-12-21 00:00:00
Title: COMMISSION DECISION of 21.12.1992 declaring a concentration to be compatible with the common market (Case No IV/M.290 - SEXTANT / BGT-VDO) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31992M0290

COMMISSION DECISION of 21.12.1992 declaring a concentration to be compatible with the common market (Case No IV/M.290 - SEXTANT / BGT-VDO) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 009 , 14/01/1993 P. 0000

 COMMISSION DECISION of 21.12.1992 declaring a concentration to  be compatible with the common market (Case No IV/M.290 -  SEXTANT / BGT-VDO) 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 Registered with advice of delivery To the notifying party Dear Sirs, Subject: <ind> Case No. IV/M.290 - Sextant/BGT-VDO  <tab>  <ind> Your notification pursuant to Article 4 of  Council Regulation No. 4064/89  I. <ind> THE TRANSACTION  1. <ind> This notification concerns the proposed joint  acquisition of VDO-Luftfahrtgeraete Werk (VDO-L) by Bodenseewerk  Geraetetechnik GmbH (BGT), a subsidiary of the group Diehl, and  Sextant Avionique SA (Sextant), a subsidiary of Aérospatiale  and Thomson CSF.   2. <ind> Sextant currently owns 25% of VDO-L's shares, the  remaining being held by VDO Adolf Schindling AG (VDO). Through  the proposed operation Sextant will increase its shareholding  to 49.5% and BGT will acquire from VDO the remaining 50.5%.   3. <ind> The main purpose of the notified transaction is to  establish VDO-L as a "centre of excellence" for the development  of symbol generators, i.e. computers used in aircraft displays.  In addition, BGT/Diehl's particular objective is to acquire the  expertise necessary for expansion of its currently limited  activities in the civil aircraft sector.    II. <ind> THE PARTIES  4. <ind> BGT, a subsidiary of Diehl GmbH, is engaged in the  production and sale of aircraft avionic equipment, land  navigation equipment, missiles and automation systems. With  regard to aircraft avionics in particular,  BGT is mainly  active in the military sector, where  it manufactures  intelligent, control  and navigation systems for aircraft and  missiles. In the civil sector, BGT produces flight guidance  equipment for the Airbus 320.  5. <ind> Sextant produces and sells equipment for civil and  military aircraft, including flight  control, displays and  navigation systems, as well as industrial and domestic  appliance components. In the aircraft sector in particular,  Sextant is inter alia a major supplier to the Airbus and a  participant in various military programmes, including the  Mirage and the new-generation Rafale.  6. <ind> VDO-L is a small company (1991 turnover of 65.9 MECU),  which specialises in the production of certain aircraft  instruments, namely symbol generators, probes and displays with  mechanical movement. VDO-L produces symbol generators for the  Airbus as a sub-contractor to Sextant.  III. PRODUCT AND GEOGRAPHIC MARKETS   <tab> Product markets  7. <ind> The proposed operation concerns the following types of  aircraft instruments and equipment:   <tab> - <ind> Indicating instruments with mechanical movement  containing a moving coil or a cross coil with a pointer.  They  indicate various aircraft operational parameters such as oil  pressure, fuel consumption, engine temperature, altitude and  air speed.  <tab> - <ind> Indicating instruments with solid state displays  based on computer (symbol generator) technology. Their  advantage is that a number of different  parameters can be  shown simultaneously and/or sequentially on a single display.  They normally consist of liquid crystal displays or cathode ray  tubes.  <tab> - <ind> Symbol generators i.e. computers generating  electrical signals which produce symbols and pictures on solid  state displays.  <tab> - <ind> Probes situated either inside or outside the  aircraft.  Their function is to receive information on internal  or external parameters, such as  temperature, pressure, speed,  etc. For the purpose of market definition internal probes  should be distinguished from external probes, because each  category performs a different function and its  manufacture  requires different technological expertise.  8. <ind> Symbol generator computers, solid state displays,  displays with movement and probes each constitute separate  product markets for the following reasons. First, they are  different, non-interchangeable types of aircraft components,  which are used in a complementary way.  Aircraft computers  receive information collected by external or internal probes  which they then transmit to solid state displays in the form of  symbols and pictures.  Displays with movement are mechanical  instruments which are installed in modern aircraft as back-up  equipment to be used in case of breakdown of electronic  instruments. Second, each type of instrument is based on  different specialised technology and know- how, as a result of  which the manufacturer of one type of instrument is not  necessarily in a position to produce other types, let alone the  entire range.   Geographic markets  9. <ind> The market for the production and sale of equipment  for civil aircraft can be considered as a world market.  There  are several indicators which strongly support this conclusion:   physical presence or activities by the same suppliers  throughout the world  and purchasing policy on the part of  aircraft manufacturers on a worlwide basis.  10. <ind> In the field of equipment for military aircraft,  strong indicators, such as the high market shares of suppliers  in their own national markets and monopsonistic features of the  national defense industry, support the conclusion that markets  are national.  IV. <tab> CONCENTRATION  Joint control  11. <ind> According to the provisions of the Shareholders'  Agreement, BGT and Sextant, the parent companies,  will have  equal voting rights in all shareholder meetings of VDO- L(50/50). Moreover, the Managing Directors and the President of  VDO-L will be elected by unanimous consent of its shareholders.  As a result, BGT and Sextant will jointly control VDO-L.  Full-function joint venture  12. <ind> VDO-L, a previously independent company, will  continue to perform on a lasting basis all the functions of an  autonomous economic entity for the following reasons.  After  the completion of the proposed operation, VDO-L will continue  to produce aircraft instruments (indicating instruments with  movement, probes) for sale to third parties. Moreover, with  regard to symbol generators, although VDO-L will continue to be  a sub-contractor to Sextant for the Airbus programme (this  represents less than 25% of VDO-L's total sales), it will also  continue to have separate activities i.e. the provision of   spare parts and after-sales service to third parties (airlines  operating Airbus aircraft). Therefore, the JV will stand as a  separate identifiable company in the market.   Absence of coordination of competitive behaviour  13. <ind> As explained below, BGT is not currently active in  any of the product markets of the joint venture. BGT is  specialised in German defense projects and it does not  currently possess the technical and commercial expertise  necessary for entry into the civil sector. There is a small  overlap between the activities of the other parent, Sextant and  the joint venture, but for the reasons set out below there will  be no coordination of their competitive behaviour in this  respect.   14. <ind> In particular, with regard to symbol generator  computers for civil aircraft, neither of the parent companies  is active in this field.  BGT does not produce or sell this  type of instrument at all nor can it be considered as a likely  potential entrant in this field.    Sextant does not produce  symbol generators for civil aircraft, but sub-contracts to VDO- L the production of its supplies to Airbus. In view of the  traditional contractual relations between Sextant and VDO-L,  Sextant has not been active in this area. Following the  proposed operation, it would not seem a reasonable course of  action for Sextant to enter this field separately. In the  military sector, Sextant manufactures a type of symbol  generator specifically designed for French military aircraft,  while VDO-L is currently working only on German defense  projects. They cannot realistically be considered as being  either actual or potential competitors in each other's markets.    15. <ind> With regard to 0probes, BGT does not produce nor sell  them. Sextant produces only probes for external use, but these  are not interchangeable with the probes for internal use  produced by VDO-L, because they perform different functions.  These different products are very specialized and there is no  possibility for one company to challenge the other without long  and costly development work.  16. <ind> With regard to displays with movement: Sextant  produces gyro-horizon mechanical instruments.  However, these  instruments are not currently produced by VDO-L nor are they  accessible to it.  As to BGT, it does not manufacture these  instruments, but only repairs them and sells spare parts mainly  under Sextant licences and in Germany only  (worlwide annual  turnover is 0.5 MECU, which is very small compared to Sextant's  annual turnover of 32 MECU.)   <ind> As regards other displays with movement, in the military  sector there is no overlap, because Sextant is exclusively  active in France and VDO-L only does work related to German  defense projects. In the civil sector, both parties manufacture  displays with movement for medium size aircraft and  helicopters. However, the parties' activities  in this respect  are limited (combined market share of about 5%). In addition to  this, and in view of Sextant's broad expertise in the field of  aircraft avionics and in particular in the civil sector, it  seems that Sextant will play a leading role in the management  of the joint venture whose main object will be  the development  and production of symbol generators.  17. <ind> The parent companies, BGT and Sextant,  are active in  the production and sale of instruments for the Airbus other  than those produced by the joint venture, in particular flight  control equipment. However, the instruments produced by each  parent belong to different product markets: BGT produces  certain specific flight control units which are not  interchangeable with  the auto-flight system manufactured by  Sextant. These activities are clearly peripheral both to the  core business of the parents and to the main purpose of the  joint venture. As a result, it does not appear likely that the  parties intend to use the joint venture as a vehicle for  coordination in these neighbouring areas.  18. <ind> In view of the considerations presented above, the  proposed transaction does not have as its object or effect the  coordination of the competitive behaviour of undertakings which  remain independent and is therefore to be examined in the light  of the provisions of Regulation No. 4064/89.   V. <ind> COMMUNITY DIMENSION  19. <ind> The proposed concentration has a Community dimension  within the meaing of Article 1(2) of the Merger Regulation for  the following reasons. First, the combined aggregate worldwide  turnover of Diehl, Aérospatiale and Thomson-CSF exceeded 5,000  MECU in 1991 (BGT/Diehl 3,016 MECU, Aérospatiale about 6,900  MECU, Thomson-CSF about 5,000 MECU).  Second, the aggregate  Community-wide turnover of two of the undertakings concerned  exceeded in 1991 250 MECU (BGT/Diehl 2,528 MECU, Aérospatiale  about 3,700 MECU). Finally, each of the undertakings concerned  did not achieve more than two-thirds of its Community-wide  turnover in one and the same Member State.    VI. <tab> COMPATIBILITY WITH THE COMMON MARKET  Horizontal assessment  20. <ind> In the civil sector, there is no overlap between the  activities of the parties except in the area of indicating  instruments with movement (see section IV above).  21. <ind> Both Sextant and VDO-L manufacture certain displays  with movement for medium-size aircraft and helicopters, but  their market shares in this market segment are low (combined  market shares of about 5% of the world market for displays with  movement).  22. <ind> With regard to military markets, both VDO-L and  Sextant manufacture symbol generators and displays with  movement but are active in different geographic markets (see  section IV above).  Vertical aspects  23. <ind> The operation will not have any significant vertical  effects because it will only lead to a consolidation of the  already existing vertical relationship between VDO-L and  Sextant:  VDO-L currently delivers all its production of symbol  generators to Sextant for the Airbus programme.  24. <ind> This consolidation will have no significant  foreclosure effect for the following reasons:   <tab> - <ind> first, there are many other competitors with  considerable financial and technological resources in each  product market where the JV is active (such as Honeywell,  Rockwell Collins, Smiths, Allied Signal-Bendix, Alenia and  GEC).   <tab> - <ind> secondly, the joint venture has a commercial  interest in continuing to supply third parties with spare parts  for symbol generators as well as probes and indicating  instruments with movement.  Conglomerate aspects  25. <ind> From a conglomerate point of view, VDO-L may benefit  from the market power of its parent companies Diehl,  Aérospatiale and Thomson-CSF.  All three groups have  substantial financial and technological resources and they are  all present in different product and geographic markets which  can lead to synergies.   26. <ind> However, competitors of these three groups have  similar or superior competitive advantages (similar or wider  range of products, ability to manufacture complete range of  aircraft instruments, considerable technological expertise and  financial resources), so that the proposed operation will not  significantly reduce the possibilities of competition, but may  even improve the competitive structure by putting the new  entity in a stronger position on the market.  27. <ind> In conclusion, it cannot be considered that the  proposed acquisition will lead to the creation or strengthening  of a dominant position as a result of which effective  competition would be  significantly impeded in the common  market.   <ind> For the above reasons, the Commission has decided not to  oppose the notified concentration and to declare it compatible  with the common market.  This decision is adopted in  application of Article 6(1)(b) of Council Regulation No.  4064/89.  For the Commission