The European Commission has opened an in-depth investigation to assess whether the proposed acquisition of rotating equipment manufacturer Dresser-Rand of the US by Siemens of Germany is in line with the EU Merger Regulation. Both companies supply turbo compressors as well as the engines which drive these compressors ("drivers").The combination of a turbo compressor with a driver is called a turbo compressor train. For turbo compressor trains driven by aero-derivative gas turbines, the Commission has concerns that the proposed transaction may reduce competition for both components, namely turbo compressors and drivers as well as for turbo compressor trains. Furthermore, the Commission's preliminary investigation also found possible competition concerns in the market for small steam turbines of less than 5 MW.The opening of an in-depth investigation does not prejudge the outcome of the investigation. The Commission now has 90 working days, until 30 June 2015, to take a decision.
Both Siemens and Dresser-Rand supply turbo compressors as well as drivers such as aero-derivative gas turbines ("ADGT"), industrial gas turbines ("IGT"), steam turbines ("ST") and electric motors. The customers for this equipment are mainly active throughout the oil and gas distribution chain, namely, in upstream exploration and production, midstream transportation, LNG and gas storage applications and downstream refinery processes, as well as in the distribution of oil and gas related products.
Commission's competition concerns
The Commission's initial market investigation indicated competition concerns in the markets for the supply of ADGTdrivers, turbo compressors and turbo-compressor trains driven by ADGTs in several oil and gas applications. In particular, the investigation revealed that the main suppliers of these products are Siemens/Rolls-Royce, General Electric and Dresser-Rand. Therefore the transaction would reduce the number of competitors from 3 main players to 2 main players in all of these markets. This may lead to less product variety and ultimately higher prices.
In addition, the investigation indicated that the parties' competitors for the supply of small steam turbines of less than 5 MW have a limited presence and do not pose a significant competitive constraint on the parties. This may lead to less product variety and ultimately higher prices.
The Commission will now investigate the proposed acquisition in-depth to determine whether these initial concerns are confirmed.
The transaction was notified to the Commission on 9 January 2015.
Companies and products
Siemens is a German public listed company headquartered in Munich. Siemens offers a wide range of products and services through a number of business divisions.
Siemens' product portfolio includes gas turbines, steam turbines, generators and compressors. Siemens also produces electric motors.
Dresser-Rand is a US public company headquartered in Houston, Texas. Dresser-Rand focuses on supplying customers in the oil and gassector and in particular for upstream exploration and production, midstream transportation, LNG and gas storage applications and downstream refinery processes, as well as distribution of oil and gas related by-products.
Dresser-Rand's product portfolio includes centrifugal and reciprocating gas compressors, small gas and steam turbines, gas expanders, gas and diesel engines and associated control panels.
Merger control rules and procedures
The Commission must assess mergers and acquisitions involvingcompanies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and 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).
In addition to the current transaction, there are six other on-going phase II merger investigations:
- the planned acquisition of a controlling stake in De Vijver Media by Liberty Global, with a decision deadline on 5 March 2015 (see IP/14/1029);
- the planned acquisition of Jazztel by Orange in the Spanish telecommunications market. The deadline for a decision is 30 April 2015 (see IP/14/2367);
- the proposed joint venture between two of world's leading coffee manufacturers, Douwe Egberts Master Blenders 1753 B.V. of the Netherlands, and Mondelēz International Inc. of the US. The Commission's deadline for a final decision is 13 May 2015 (see IP/14/2682);
- the planned acquisition of Biomet byZimmer, with a decision deadline on 26 May 2015 (see IP/14/1091);
- the proposed joint venture between the three collective rights management organisations PRSfM, STIM and GEMA in the online licensing of musical works, with a deadline on 26 June 2015 (see IP/15/3300);
- the proposed acquisition of the Greek gas transmission system operator DESFA by the Azeri state oil company SOCAR (see IP/14/1442).