Anticipated acquisition by Honeywell International Inc of the Hymatic Group Ltd

Affected market: Aerospace components and valves

No. ME/1463/03

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, assessment, and decision.

The OFT’s decision on reference under section 33 given on 17 December 2003

PARTIES

Honeywell International Inc (Honeywell) is an advanced technology manufacturing company incorporated in the USA and operating world-wide through four divisions: Speciality Materials; Transportation and Power Systems; Automation and Control Solutions; and Aerospace Solutions. It is a major supplier of equipment and systems to the aerospace sector. In 2002 Honeywell achieved turnover in the UK of  [ ] (see note 1) and worldwide turnover of $22,274 million (£14,805m). The Hymatic Group Ltd (Hymatic) is a UK based company majority owned by the venture capital company 3i. It designs, manufactures and overhauls components and systems, principally for use in aerospace and defence markets. Hymatic operates in three main areas: Joule-Thomson Cryogenic Coolers; Stirling Cycle Cryogenic Coolers; and Fluid Control, including aerospace components. In 2002 Hymatic had a world-wide turnover of £21.7 million, of which £13.1 million was achieved in the UK.

TRANSACTION

Honeywell proposes to buy the entire issued share capital of Hymatic for an initial consideration of approximately  [ ] (see note 1), followed by an adjustment contingent on the level of future sales of certain Hymatic products. The 40 day administrative deadline is 5 January 2004. The merger has also been notified in Italy and Germany. It has already been considered and cleared by Germany.

JURISDICTION

As a result of this transaction arrangements are in progress or in contemplation which if carried into effect will result in the creation of a relevant merger situation under sections 33(1)(a) and 23 of the Enterprise Act 2002 whereby Honeywell and Hymatic will cease to be distinct.  The parties overlap in the supply of aerospace components and the share of supply test in section 23 of the  Act is met in respect of the supply of control valves and anti-ice valves for use in the aerospace industry in the UK.  A relevant merger situation is therefore likely to be created.

ASSESSMENT

The merger will result in Honeywell having a 20-30 per cent (see note 2) share of supply of valves for use in ECS systems in the aerospace industry on a world-wide basis, with an increment of only 0-5 per cent (see note 2). The increment arises only in respect of valves and not ECS systems since Hymatic is not an active competitor in the latter product. Third parties consistently argued that the correct geographic market definition for these products is global. A number of major suppliers remain post-merger providing a competitive constraint to the merged business. In addition, main customers are likely to be able to exercise some degree of buyer power in purchasing components and systems.

The OFT does not believe that it is or may be the case that the creation of the relevant merger situation may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom for goods or services

DECISION

This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.

2. Actual figures replaced by a range at the request of the parties

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