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Brussels, 5 May 2011

Mergers: Commission opens in-depth investigation into proposed merger between Caterpillar and MWM

The European Commission has opened an in-depth investigation under the EU Merger Regulation into the planned acquisition of sole control of MWM Holding GmbH of Germany by Caterpillar Inc. of the US, both active in the commercialisation of reciprocating engine generator sets (“gensets”), which are used for power generation. The Commission’s initial market investigation indicated potential competition concerns with respect to gas-fuelled gensets. The decision to open an in-depth inquiry does not prejudge the final result of the investigation. The Commission now has 90 working days, until 16 September 2011, to take a final decision on whether the transaction would reduce effective competition in the European Economic Area (EEA).

Commission Vice President in charge of competition policy Joaquín Almunia said: “The proposed acquisition would remove a strong competitor from the market. The Commission needs to make sure that effective competition is preserved, in order to maintain innovation and prevent harm to consumers."

Caterpillar is active worldwide in the manufacture and sale of machinery, engines and financial products. MWM is active in the provision of products, services and technologies for decentralized energy supply using gensets. Gensets combine a reciprocating engine with a generator and other ancillary equipment, and are used for power generation.

The Commission’s initial investigation showed that the proposed transaction would combine two leading suppliers of gensets in Europe, in particular for what regards gensets which run on gas.

At this stage of the investigation, the Commission fears that the remaining competitors in the market may not exert sufficiently-strong restraint on the behaviour of Caterpillar post-acquisition. The removal of an important competitor may also have a negative impact on the level of innovation, leading to a reduction of choice for customers and potentially an increase in prices for gas-fuelled gensets. During the initial one-month investigation, concerns were also raised regarding access to the installation and servicing of gensets. Consequently, at this stage, the acquisition raises serious doubts as to its impact on competition.

The Commission will now investigate the proposed merger in-depth to find out whether these initial concerns are confirmed or not.

The transaction did not originally qualify for review under the EU Merger Regulation as it does not meet the turnover thresholds. Instead it was notified to the German, Austrian and Slovak competition authorities for approval. The German competition authority requested that the review be transferred to the Commission and the Austrian and Slovak competition authorities joined the request. The transaction was subsequently notified to the Commission on 14 March 2011.

More information on the case will be available at:

Merger control rules and procedures

The Commission, in 1989, was given the power to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Art 1 of the Merger Regulation). The Commission clears the vast majority of mergers after a one-month review, but if it has competition concerns it must open an in-depth investigation (Phase II review). The opening of a full probe does not prejudge its outcome.

There are currently two other Phase II investigations. They concern the proposed acquisition of the Sara Lee household insect control business by SC Johnson (see IP/10/1770 of 22 December 2010; deadline is 12 May) and the proposed acquisition of Myllykoski and Rhein Papier by UPM, both active in the paper production sector (see IP/11/258 of 4 March 2011; deadline is 19 July 2011). The proposed joint venture between Citovita and Citrosuco, two Brazilian producers of orange juice, which was also in Phase II has been cleared on 4 May 2011 (see IP/11/531).

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