Brussels, 24 April 2014
Mergers: Commission approves Wood Group and Siemens joint venture
The European Commission has cleared the proposed creation by Wood Group (US) and Siemens (Germany) of a joint venture (JV) for rotating equipment services under the EU Merger Regulation. The Commission's investigation confirmed that the proposed transaction does not raise competition concerns.
Under the EU Merger Regulation, the European Commission has cleared the proposed creation by Wood Group (US) and Siemens (Germany) of a joint venture (JV) for rotating equipment services. The Commission's investigation confirmed that the proposed transaction does not raise competition concerns.
The Commission's investigation focused in particular on aftermarket services, including the supply of replacement parts and component repair for mature gas turbines. Mature gas turbines are those older than approximately fifteen years, and their warranty has usually expired. On the market of services for mature gas turbines, Original Equipment Manufacturers (OEMs) such as Siemens, General Electric and Alstom compete with Independent Service Providers (ISPs) such as Wood Group and Siemens' subsidiary TurboCare which is contributed to the JV.
On the market for services for all mature gas turbines of all OEM brands (i.e. including Siemens and other brands), the combined market share of Wood Group and Siemens and the JV remains limited. A large number of strong rivals, both OEM and ISP remain, which will continue to be actively competing in the European Economic Area (EEA) and worldwide. Regarding a market of services for mature gas turbines manufactured by Siemens only, the transaction leads to a limited overlap. In line with the previous decision making practice of the Commission the investigation confirmed that it is not appropriate to distinguish the market further depending on the capacity of the gas turbine. Competitors are able to switch between different power categories within a short time frame and without incurring significant costs. The market investigation also demonstrated that entry of new players occurred in the past and new entry is expected in the near future.
The Commission therefore concluded that the transaction would not raise competition concerns.
The transaction was notified to the Commission on 17 March 2014.
Companies and products
Wood Group provides a range of services to the oil and gas, and power generation industries worldwide, including engineering, production support, maintenance management and industrial gas turbine overhaul and repair services.
Siemens is a global engineering and electronics conglomerate with activities in a number of sectors, including the energy sector. Siemens is an OEM for rotating equipment and provides aftermarket services. Siemens provides after-sale services for its own manufactured equipment through its business unit Siemens Energy Services. In relation to equipment manufactured by other OEMs, Siemens acts as an ISP through its business unit TurboCare, through which it provides maintenance support and other services. TurboCare will be added to the JV.
The JV will provide services aimed at a range of rotating equipment, including mature technology gas turbines, steam turbines, generators, pumps and compressors.
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).