The European Commission has approved, under the EU Merger Regulation, the acquisition of Asco Industries by Spirit Aerosystems. Both companies are active in the aerospace equipment industry worldwide.
The approval is conditional on full compliance with commitments offered by Spirit. Both companies supply aerostructures, which are components for wings, fuselage, and nacelles, for aircraft manufacturers such as Airbus and Boeing. The Commission’s investigation found that the proposed merger would raise no competition concerns regarding vertical supply relationships or horizontal overlaps in the same markets.
However, the Commission identified concerns in the worldwide market for the supply of slat systems in general and of slats in particular, since the proposed merger would have increased the likelihood of companies in this market being able to coordinate their behaviour.
Slat systems allow the wing of an aircraft to operate at a higher “angle of attack” (i.e., the angle at which the wing meets oncoming air). They include several components such as slats, slat supports, and racks and pinions.
Spirit and Asco operate at different levels of the supply chains for slat systems. Asco is a member, together with Sonaca and BMT Eurair, of a joint venture named Belairbus. Through Belairbus, the three parent companies participate in the development and production of slat systems for all the main commercial Airbus planes.
Sonaca, one of Asco’s partners in Belairbus, is also a leading supplier of slats and the only competitor of Spirit in this market. Therefore, by acquiring Asco, Spirit would have also become a shareholder of Belairbus, alongside its sole competitor for slats, Sonaca.
The Commission was concerned that, following the transaction, Belairbus would become a vehicle for increased transparency between the companies and would increase the likelihood of coordinated behaviour between Spirit and Sonaca, with negative effects on competition for manufacturing and supply of slats, and slats systems as a whole, to the detriment of Airbus and other aircraft manufacturers sourcing slats worldwide.
To address the Commission’s competition concerns, Spirit offered to structurally modify the set-up of Belairbus to permanently eliminate its role as a commercial and technical platform for negotiations with Airbus. As a supplementary commitment, the companies have set up mechanisms to destroy any existing commercially sensitive information of Sonaca held by Asco, so this will not be transferred to Spirit after the transaction.
On this basis, the Commission concluded that the proposed acquisition, as modified by the commitments, would no longer raise competition concerns.