CELEX: 31994M0535
Language: en
Date: 1994-12-21 00:00:00
Title: COMMISSION DECISION of 21/12/1994 declaring a concentration to be compatible with the common market (Case No IV/M.535 - Mannesmann Demag / Delaval Stork) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)

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31994M0535

COMMISSION DECISION of 21/12/1994 declaring a concentration to be compatible with the common market (Case No IV/M.535 - Mannesmann Demag / Delaval Stork) according to Council Regulation (EEC) No 4064/89 (Only the English text is authentic)  

Official Journal C 023 , 14/02/1995 P. 0004

 COMMISSION DECISION of 21/12/1994 declaring a concentration to be compatible with the  common market (Case No IV/M.535 - Mannesmann Demag/Delaval Stork) 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.535 - Mannesmann Demag/Delaval Stork <ind> <ind> Notification of 18.11.1994 pursuant to Article 4 of Council Regulation No 4064/89 1.<ind> The above mentioned notification concerns the planned acquisition by Mannesmann Demag  AG (Mannesmann) of all the turbo machinery activities of the U.S. company, Imo Industries Inc.,  (Imo) consisting of the Delaval turbine and turbocare Division, and its 50% stake in Delaval Stork  V.O.F. (Delaval), a company at present owned by Imo Industries Inc. and Stork NV. 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 with the functioning of the EEA  Agreement.  I.<ind> THE OPERATION AND THE PARTIES 3.<ind> Mannesmann is active in the development, engineering, production and sales of plants and  machinery, especially in the field of metallurgical plants, construction equipment, compression  equipment and plastic machinery. 4.<ind> Stork is a Dutch group mainly active in the fields of systems for textile and paper finishing,  printing form manufacturing, food and beverage industries, meat and poultry processing and  industrial services, including mechanical and electrical contracting, manufacturing, maintenance  and engineering. 5.<ind> Delaval is a Dutch company jointly owned by Imo and Stork mainly active in the  manufacturing, sale and maintenance of turbo machinery equipment (compressors and steam  turbines). 6.<ind> Mannesmann through its American subsidiary and Imo have concluded an Asset Purchase  Agreement on 4 November 1994 whereby Imo will transfer its Delaval Turbine Division, its  Turbocare Division and its wholly-owned subsidiary Deltex Services, Inc to Mannesmann. This  constitutes a separate operation without Community dimension.  7.<ind> By conclusion of a separate new Joint Venture Agreement signed 16 November 1994, Imo is  also selling its 50% share in Delaval to Mannesmann's Dutch affiliate, Mannesmann Beheer B.V..  Delaval will then be controlled jointly by Mannesmann and Stork. These agreements will bring  about a lasting change in the structure of Delaval. Stork has the right to put for sale at any time after  4 years it's shares in DeLaval, and Mannesmann have reserved an option to buy. Stork does not have  a corresponding right to demand or to be granted the right to acquire Mannesmann's share holding  in DeLaval. II.<ind> CONCENTRATION 8.<ind> The Commission cleared the former cooperative structure of Delaval by decisions under Art.  85(3) of EEC Treaty (OJ No L 215 of 23.08.1977 and renewal OJ No C 255 of 25.09.1987).  Turbomachinery equipment manufactured by Delaval was technically equivalent with Imo's US  made products and the parents were considered to be "actual or at least potential competitors". The  structure of the joint venture has been changed as described below. <ind> a) Joint control 9.<ind> The financing of the joint venture and the share of the profits and losses is to be on equal  basis. The parties have agreed to integrate the business policy of the new entity into Mannesmann's  global strategies and organisation for turbo machinery activities. The general manager of Delaval  will be obliged to report continuously to the chairman of Mannesmann's turbo machinery division.  Furthermore, the management of Delaval will be subject to binding directives and guidelines from  Mannesmann's turbo machinery division. These will concern day to day management and business,  including personnel. Stork is prohibited in the Agreement from acting inconsistently with these  guidelines. 10.<ind> The election, suspension and dismissal of the members of the board of Delaval will be  proposed by Mannesmann, subject to the agreement of Stork. The internal rules of the managing  Board have to be approved by both shareholders. Under the Agreement, both parents shall be  represented equally within the Partner's Meeting by three representatives, and each parent has the  veto power to block actions concerning annual business plans, capital investments, and the strategic  commercial behaviour of Delaval. Each shareholder thus retains the possibility of exercising a  decisive influence. It follows that Delaval will be operating under the joint control of Mannesmann  and Stork. <ind> b) Concentration 11.<ind> Delaval is to be an independent enterprise, with sufficient financial and other resources to  operate on a lasting basis as an autonomous economic entity. It will continue to benefit from the  former Imo's know how and technology which is being transferred to Mannesmann. DeLaval will  further benefit from synergy effects in the fields of development, design, manufacture, marketing,  sales and after sales activities which will allow it to remain competitive in the market. 12.<ind> The activities of the joint venture are production, sale, and maintenance of compressors  and steam turbines. Stork NV and its subsidiaries are not active in these fields. It would be costly  and commercially unreasonable for Stork to re-enter the market.  The acquisition of turbomachinery  products by Stork, only so far as is necessary for other engineering projects or general contracting,  can be regarded as insignificant. Mannesmann, the new shareholder, is active in the production and  sale of turbomachinery. Since Stork has abandoned activities in this area, the joint venture cannot be  used as an instrument for producing any coordination between the parents. It is therefore not the  object or effect of the concentration to coordinate the competitive behaviour of the parents.  13.<ind> Thus the notified operation constitutes a concentration within the meaning of Article  3(1)(b) of the Regulation. III.<ind> COMMUNITY DIMENSION 14.<ind> The undertakings concerned have a combined aggregate worldwide turnover in excess of  5.000 million ECU. Both Mannesmann and Stork have a Community-wide turnover in excess of 250  million ECU but do not achieve more than two-thirds of their aggregate Community-wide turnover  within one and the same Member State. The notified operation therefore has a Community  dimension. IV.<ind> COMPATIBILITY WITH THE COMMON MARKET <ind> a) the relevant product market 15.<ind> Process gas compressors are mainly used in special industrial applications where a variety  of basic and compound gases have to be compressed for processing or transmission purposes. The  difference between process gas compressors and standard type compressors is that process gas  compressors are engineered and produced individually according to customer specifications.  Standard type compressors are made according to manufacturer specifications for a preselected  application range. Such compressors only have a limited overlap with process compressors. 16.<ind> There are two types of process gas compressors: positive displacement and turbo  compressors. The parties mainly manufacture turbo compressors. The question of whether positive  displacement and turbo compressors constitute separate product markets could be left open since,  even on the basis of a narrower definition, the operation does not raise serious doubts as to its  compatibility with the common market. 17.<ind> Mannesmann and Delaval furnish specialised after sales services for process gas  compressors. As compressors are technically sophisticated, customers purchase after sales services  from the manufacturer. There is no market for third party repair services and market shares would  be parallel to the market shares in the field of manufacture and sales of process gas compressors.  Delaval is also active in the manufacture of steam turbines. Mannesmann is not active in this  business. <ind> b) the geographic reference market 18.<ind> Despite the fact that the bulk of compressors is sold in the continent where they are  produced, approximately 20% of the production is exported to other continents. Such trade flows go  both directions, as the technical skills of US, European and Japanese based producers are on a  comparable level. Main customers of process compressors are internationally acting engineering  companies and general contractors as well as international oil and gas producers, chemical industry  and steel manufacturing. A distribution network is not required in this business as quotations and  supplies are directly performed between manufacturer and purchaser. 19.<ind> As a result geographical markets seem at present to be mainly West European and even  worldwide. The precise delimitation of the relevant geographic market does not need to be further  defined in the present case because even on the basis of a narrower definition, the operation does not  raise serious doubts as to its compatibility with the common market. V.<ind> COMPETITIVE ASSESSMENT 20.<ind> Aggregate West European market shares for the new entity will be under [...] (Business  secret), taking into account only the turbo process compressors segment. Worldwide market share  will be about [...] (Business secret). This includes the activities of the parties in the USA. The effect  of vertical integration (manufacturing of turbines in the case of Delaval) is not of material  importance for the assessment of this case because Delaval is a minor player in the turbines market. 21.<ind> Potential market entries are likely as most manufacturers of other turbomachinery products  are in a position to enter the market. The flexibility of producers (of for instance gas turbines) to  expand or shift their production to compressors is to be regarded as high. Technical or regulatory  barriers do not exist. The competitors with higher market shares in Europe are Nuovo Pignone  (General Electric Group) and Sulzer. Other competitors which are technically and financially strong  include MAN, Atlas Copco, Hitachi, Kawasaki, and Dresser Rand. Thus, the proposed concentration  will not create or strengthen a dominant position in the affected market. VI.<ind> ANCILLARY RESTRAINTS 22.<ind> The parties to the Delaval Joint Venture Agreement have agreed that companies of the  Stork Group must not compete with Delaval for the running time of the joint venture and a  subsequent period of 3 years. This clause reflects the permanent withrawal of Stork from the market.  A period of three years is recognised as appropriate and the present decision covers the non- competition clause for such a period. VI.<ind> CONCLUSION 23.<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.  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