AaE

Mergers: Commission approves proposed acquisition of a controlling shareholding in Aker Yards by STX

The European Commission has approved under the EU Merger Regulation the proposed acquisition of control of the Norwegian shipbuilder Aker Yards by STX of South Korea. After an in-depth investigation, launched in December 2007 (see IP/07/1979), the Commission concluded that effective competition on the shipbuilding markets would not be significantly impeded as a result of the proposed transaction.
Aker Yards is active in the construction of cruise ships and ferries, and also builds merchant vessels and offshore vessels. It is one of the three main players on the global market for the construction of cruise ships, together with Fincantieri (Italy) and Meyer Werft (Germany).

STX is a Korean shipbuilder mostly active in building various types of cargo vessels, such as container ships or gas tankers. Until now, STX has not built cruise ships or ferries.

On 20 December 2007, the Commission opened ain-depth investigation (see IP/07/1979) because of concerns that the proposed merger might, in particular, remove STX as a potential new market entrant into a concentrated cruise ship manufacturing market.

The Commission’s in-depth investigation of the proposed transaction has however dispelled the initial doubts. The Commission found that by itself STX was still far from close to becoming an effective competitive constraint on the existing cruise ship construction market. The in-depth investigation also showed that STX was not the only possible market entrant and that post-merger a number of other Far-East shipbuilders would be as equally well placed as STX to enter the market.

The Commission also examined a concern brought forward by a third party related to subsidies, that South Korea might have granted or might grant in the future to the merged entity and that might enable the latter to undercut prices and monopolise the cruise ship market.

The Commission found that, regardless of whether any of the financial instruments granted to STX in the past were subsidies, the current financial position of STX would not give the merged entity a dominant position.

In addition, the Commission found no evidence indicating that STX was likely to receive subsidies in the future which could significantly strengthen its financial position and enable it to impede competition in the markets concerned.

In particular, the Commission found that even if the type of future hypothetical subsidies identified by the third party (subsidised loans and guarantees) were granted, the advantage would not be such as to enable the merged entity to acquire a dominant position on the cruise ship market. This is because:

(i) the current financial position of STX would not give the merged entity a dominant position
(ii) Aker Yards is also not currently dominant, as it competes with the market leader Fincantieri and Meyer Werft
(iii) there are a number of structural features of the market such as buyer power of a few large customers, that would make very unlikely any attempts by STX to monopolise the cruise ship construction market based on the alleged subsidised pricing in the current market structure.
The Commission therefore concluded that competition on the market for cruise ships would not be reduced as a result of the transaction. The Commission also analysed the ferries market, where similar concerns were raised, and came to the same conclusion.

The in-depth investigation also confirmed that there are no competition concerns arising from minor overlaps of the merging companies' activities in the area of certain types of cargo ships or from the vertical integration of STX into engine production or shipping services.

More information on the case will be available at:

http://ec.europa.eu/comm/competition/mergers/cases/index/m99.html#m_4956