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Brussels, 13 July 2005

Mergers: Commission approves takeover of VA Tech by Siemens, subject to conditions

The European Commission has approved under the EU Merger Regulation the proposed takeover of the VA Tech group of Austria by Siemens of Germany, subject to the condition that Siemens divests itself of VA Tech's hydro power business and ensures the independence of metal plant builder SMS Demag. The Commission decision follows an in-depth investigation into the takeover (see IP/05/175). In light of the commitments given by Siemens, the Commission has concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or a significant part of it.

Competition Commissioner Neelie Kroes said “We are in favour of the establishment of strong, competitive companies as long as effective competition is maintained on all the relevant markets. In this particular case, I wanted in particular to be sure that final consumers would not have to pay higher electricity prices passed on to them by suppliers because of more expensive hydro-power plants. I am therefore pleased that the commitments given by Siemens allow the Commission to approve this merger”.

Siemens and VA Tech operate throughout the world in a number of similar sectors. Their products are used in areas such as power stations, electricity supply networks, trains, steelworks and large buildings. They are market leaders in some of the relevant products. The Commission opened an in-depth market investigation because it had serious concerns that the proposed transaction, as notified, would have impeded effective competition within the EEA .

In particular, VA Tech Hydro is the European market leader for key components used in hydro-electric plants, such as turbines and generators. The Commission found that a merger with Siemens’ hydro business would have resulted in competition being significantly impeded in the EEA. Siemens’ commitment to sell VA Tech’s hydro power business, operated by VA Tech Hydro, to a suitable purchaser means that competition will not be significantly affected.

In metal plant building, Siemens currently owns a 28% shareholding in SMS Demag, which the Commission found to be VA Tech’s main competitor in the building of steel production plants. Siemens had exercised a put-option (effective 31 December 2004) to sell its stake to SMS, the parent company of SMS Demag. The transfer of the shares has, however, been delayed due to a legal dispute relating to their valuation. Under the commitments given by Siemens, Siemens’ representatives on SMS Demag’s shareholder bodies will be replaced by trustees, thus ensuring the company’s independence from Siemens.
In a separate decision designed to ensure that a structural link between the competitors Bombardier and Siemens in the market for trams was brought to an end, the Commission released Bombardier from its obligation, laid down in the Commission’s decision to clear Bombardier’s takeover of ADtranz of April 2001 (see IP/01/501), to purchase certain traction systems for trams from VA Tech.

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