Brussels, 19 December 2012
Mergers: Commission clears acquisition of US titanium producer Timet by US component manufacturer PCC
The European Commission has cleared under the EU Merger Regulation the proposed acquisition of the US titanium producer Timet by the US component manufacturer Precision Castparts Corporation (PCC). Timet produces titanium parts that PCC uses for manufacturing components. The Commission concluded that the transaction would not raise competition concerns, in particular because the merged entity would be unable to raise prices for Timet’s inputs because of the existence of long term supply agreements (LTAs) and original equipment manufacturers (OEMs) bargaining power.
The Commission examined the impact of the transaction on the upstream markets of titanium mill and melted products and the downstream markets of titanium casted and forged components. Titanium is a metal used in aerospace applications.
The Commission’s investigation took into account the distinct features of the aerospace titanium industry. A small number of engine OEMs account for the majority of component purchases. OEMs regularly enter into LTAs with titanium producers and component manufacturers. LTAs grant OEMs price stability and guarantee suppliers a base of sales. Furthermore, downstream and upstream LTAs are interlinked in that they allow OEMs to direct supplies to component manufacturers of their choice. Finally, the number of upstream and downstream suppliers available to each OEM depends on which suppliers the OEMs have certified for specific products.
The Commission's investigation showed that any potential market power held by Timet upstream would be unlikely to result in price rises by the merged entity for the downstream players. Downstream competitors and OEMs will continue to benefit from the terms of existing LTAs. OEMs have bargaining power and can ultimately certify competitors of the merged entity for the supply of titanium inputs.
Moreover, the Commission found that no other competition concerns were likely to arise. Timet's competitors would continue to have a sufficient customer base, because PCC already sources most of its titanium needs internally or from Timet. Confidential information of PCC's competitors and R&D projects to which Timet might have access would continue to be protected since PCC already has in place appropriate protection mechanisms which could be reinforced if required by OEMs.
The Commission therefore concluded that the transaction would not significantly impede effective competition in the European Economic Area.
The transaction was notified to the Commission on 14 November 2012.
Companies and products
PCC is a manufacturer of complex metal components and products, including investment castings, forgings and fasteners. Its products are used mainly in the aerospace industry but also in other industrial and medical applications.
Timet is a global producer of a range of titanium-based melted and mill products which are used in the manufacture of titanium components. Its activities are largely concentrated in the aerospace sector.
Merger control rules and procedures
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).
More information on the case is available at:
Antoine Colombani (+32 2 297 45 13)
Marisa Gonzalez Iglesias (+32 2 295 19 25)