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Case Studies Mergers

Case Studies Mergers

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Published by kittie
European Business Environment
European Business Environment

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Published by: kittie on Nov 11, 2008
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10/30/2012

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CASE STUDIES – Mergers1.
Commission clears Volvo's acquisition of Renault's truck business subject to significantundertakings
The European Commission has decided not to oppose the acquisition by Volvo of Renault Vehicule Industriels ("RVI"). Volvo is a Swedish manufacturer of trucks, buses and engines. RVI has until now been a wholly owned subsidiary of Renault SA. The decision follows acareful investigation of the affected markets, in the course of which the parties have made significant undertakings that will remove the competition concerns resulting from theacquisition of RVI.
 On 14 March 2000, the Commission declared the proposed merger between Volvo and Scaniaincompatible with the Common market (Case No. COMP/M.1672 Volvo/Scania, decision published on the Internet. See also press release IP/00/257). Following this decision Volvo hasremained a significant shareholder in Scania. Similarly, RVI has, through the Irisbus jointventure
,been linked to Iveco (of the Fiat group) in the production and sales of buses. However,in the context of the RVI acquisition, the parties have committed vis-à-vis the Commission toremove these links to Scania and Iveco within a specific timeframe. In addition, the parties havealso undertaken to eliminate the overlap in bus activities in France created by the operation.These undertakings will ensure that the present concentration will not lead to negative effects oncompetition on the markets considered in the Volvo/Scania case or, through the additional link with the Fiat group, on the bus markets. They have also enabled the Commission to focus itsinvestigation on the relatively limited number of markets where both Volvo and RVI havesignificant activities.In heavy trucks (>16 tonnes), the merger will only create significant overlaps in three Europeancountries, namely in Finland (combined market share of 55%), France (49%) and in Portugal(43%). In medium heavy trucks (7-16 tonnes), the parties will achieve their highest combinedmarket shares in France (44%) and in Denmark (39%). In all other EU countries the combinedVolvo/RVI share would be around 30% or below.In Finland, Volvo has a market share of 37% for heavy trucks, while RVI has a share of 18%.However, RVI is primarily active through an extensive co-operation with Oy Sisu AB ("Sisu"), anational truck producer. In 1997 RVI and Sisu established a joint venture company RS HansaAuto OY ("Hansa") to handle distribution of RVI and Sisu trucks, parts and accessories in Finlandand the Baltic area. Following a commitment, RVI's share of Hansa will be sold within a specifictimeframe. TheThis undertaking solves the competition concerns on the Finnish market for heavytrucks.The merged entity will remain subject to effective competition from several well-establishedcompetitors in all other markets. For example, in France, RVI has been loosing market share since1994. The main beneficiary of this has been DAF, which has tripled its market share in that period. At present all the other European truck producers are present in France and achievesubstantial sales ranging from 6-16%. Finally, the investigation has confirmed that Volvo and RVIare not seen as particularly close substitutes in any market. Therefore, the concerns relating to theacquisition of a close competitor, which was one of the objections raised in the Volvo/Scaniacase, does not arise in the present concentration.
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Commenting on the decision, Mr. Monti, the Commissioner responsible for competition policy,made the following statement. "Today's decision to clear the merger between Volvo and RVIconcludes in a satisfactory manner a process that for the Commission started almost a year agowith the notification of the Volvo/Scania deal". He added: "We can now see the final results of theCommission's prohibition decision. Since then not only Volvo has teamed up successfully withRVI. Also Scania has found an alternative strategic partner in Volkswagen, which was not previously active in the production of heavy trucks and buses. These transactions will hopefullycontribute to the development of a more competitive situation in the European markets for heavyvehicles."
2. Mergers: Commission clears acquisition of Reebok by adidas
The European Commission has cleared under the EU Merger Regulation the proposed € 3.1billion acquisition of US based Reebok International Ltd (“Reebok”) by adidas-Salomon AG (“adidas”) of Germany. The Commission concluded that the transaction would no significantly impede effective competition in the EEA or any substantial part of it.
Reebok and adidas are global players active in the supply of sports and leisure footwear, clothingand equipment. The merger will create one of the leading groups in the European and worldmarkets. The Commission’s investigation focused on the market for athletic footwear in Europe,where both adidas and Reebok are strong players. The investigation showed that there arehorizontal overlaps between the activities of adidas and Reebok.However, the market investigation revealed that adidas and Reebok have slightly different brandand pricing positions. adidas is perceived as a professional, technically oriented brand with strongEuropean roots. Reebok predominantly targets young people and women, is more a “leisure” brand and has a stronger presence in American sports that are not excessively popular in Europe.Partly due to its different heritage, Reebok’s image on the European markets is weaker than thoseof adidas or the worldwide leader Nike. Also in terms of pricing, adidas is positioned in themedium to high price points, while Reebok is stronger in the low to medium price points.In those sport shoes categories and price points where both adidas and Reebok are strongest, i.e.medium price points in tennis, basket-ball and workout shoes, the Commission did not find anyevidence that the merged entity would be able to increase prices. This is due to the intensecompetition coming from several players with significant market shares and strong brands.In an unrelated case, on 12
th
October.2005 the Commission approved, subject to conditions, thesale of adidas’ Salomon business segment to the Amer Sports Corporation
3. Mergers: Commission clears planned acquisition of control over Eurowings byLufthansa, subject to conditions
The European Commission has cleared under the EU Merger Regulation the proposed acquisition of control by German airline Deutsche Lufthansa AG over the German airline Eurowings Luftverkehrs AG and its subsidiary, the low cost airline Germanwings. TheCommission's clearance is conditional upon the parties surrendering slots at Vienna and  Stuttgart airports and other concessions. In light of these commitments, the Commission hasconcluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or a substantial part of it.
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