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Brussels, 15th May 2009

Mergers: Commission approves proposed acquisition of Hypo Real Estate by Germany's Financial Market Stabilisation Fund

The European Commission has approved under the EU Merger Regulation the acquisition of German financial institution Hypo Real Estate AG ("HRE") by Germany's state-owned Financial Market Stabilisation Fund ("SoFFin"). The Commission concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it. This is the first time in the current financial crisis that a bank nationalisation has been notified to the Commission under the EU Merger Regulation.

SoFFin was created, via a legislative package of the Federal Republic of Germany, in October 2008 with a view to acting as a vehicle for state interventions to avert the implications of the current financial crisis and to stabilising the financial system in Germany. For this purpose SoFFin is, inter alia, entitled to acquire shareholdings in individual financial institutions. SoFFin is administered by the Financial Market Stabilisation Agency and controlled by the German Federal State through the Federal Ministry of Finance.

HRE is a Germany-based financial institution mainly active in commercial real estate financing, public sector financing as well as capital markets and asset management. For its refinancing, HRE is entitled to and active in issuing covered bonds ("Pfandbriefe").

The Commission had to assess the proposed transaction under the Merger Regulation, given that the legal provisions of Germany's Financial Market Stabilisation Act and the de facto situation do not ensure that HRE is operated as a separate commercial entity with independent decision-making powers from other state-controlled undertakings after the transaction, in particular, the Kreditanstalt für Wiederaufbau ("KfW"). Both HRE and KfW fall within the control of the Federal Ministry of Finance post-transaction and both meet the turnover thresholds under the EU Merger Regulation. On this basis, and without it being necessary to analyse the position of other state-controlled undertakings, the Commission concluded that the transaction fell within the Commission's jurisdiction.

The proposed transaction does not raise any competition concerns. The Commission has assessed horizontal overlaps between HRE and KfW, and concluded that the proposed transaction would only have a negligible impact on competition. The Commission has therefore unconditionally approved the proposed transaction.

The Commission opened a in-depth investigation under EC Treaty State aid rules into state support measures for HRE on 7th May 2009 (see IP/09/712).This separate investigation remains open.

More information on the case will be available at:

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