Knauf and Armstrong are two of the main suppliers of modular suspended ceilings in Europe. Modular suspended ceilings allow for flexible access to the installations in the ceiling cavity and are widely used in the construction of non-residential buildings across Europe, such as offices, hospitals or schools.
The Commission's investigation
The Commission was concerned that the proposed acquisition would significantly reduce the level of competition in the markets:
for mineral fibre tiles for modular suspended ceilings in Austria, Lithuania, Spain and the UK and
for grids for modular suspended ceilings in Austria, Spain and the UK. These are the metal grid structures on which ceiling tiles are placed to form a modular suspended ceiling.
The merged entity would have been by far the largest supplier in each of those markets, with limited constraints from competitors. The Commission was therefore concerned that the proposed acquisition would harm competition and lead to increased prices for commercial and public customers.
The proposed remedies
To address the Commission's competition concerns, Knauf offered the following commitments:
The divestment of Armstrong's plants for the production of mineral fibre tiles and grids located in Team Valley, UK.
The transfer of Armstrong's sales teams and customer base in each of the countries where the Commission raised preliminary concerns (Austria, Lithuania, Spain and the UK) and in additional countries to ensure the viability and competitiveness of the divestment business (Estonia, Germany, Ireland, Italy, Latvia, Portugal, and Turkey).
These commitments eliminate the Commission's concerns in relation to the proposed acquisition. They remove the overlap between the companies' activities in each of the national markets for which the Commission had concerns and ensure that the divestment business will be a viable competitor to the merged entity.
The Commission therefore concluded that the proposed transaction, as modified by the commitments, would no longer raise competition concerns in Austria, Spain, Lithuania or the UK. The decision is conditional upon full compliance with the commitments.
Companies and products
Knauf, based in Germany, produces and sells insulation materials, dry-lining systems, plasters and other products, including grids and tiles for suspended ceilings.
Armstrong, the ceilings business of Armstrong World Industries outside the Americas, produces and sells commercial and residential ceilings, wall and suspension system solutions.
On 15 March 2018, the Commission accepted a request from Austria, Germany, Lithuania, Spain and the United Kingdom, to assess the acquisition of Armstrong by Knauf under the EU Merger Regulation. The proposed transaction was initially notified to Austria for regulatory clearance, as the transaction did not meet the turnover thresholds of the EU Merger Regulation. Austria submitted a referral request to the Commission pursuant to Article 22(1) of the EU Merger Regulation on 7 February 2018, which was subsequently joined by Germany, Lithuania, Spain and the United Kingdom. In light of this, the Commission was required to examine the impact of the concentration only within the territory of those referring Member States.
Merger control rules and procedures
The transaction was initially notified to the Commission on 20 June 2018 and subsequently withdrawn. The transaction was notified to the Commission again on 17 October 2018.
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). This deadline is extended to 35 working days in cases where remedies are submitted by the parties, such as in this case.