Anticipated acquisition by GKN plc of the Aerospace Division of Pilkington plc

Affected market: Aircraft transparencies

No. ME/1300/03

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, assessment and the decision.

The OFT's decision on reference under section 33 of the Enterprise Act given on 25 September 2003

PARTIES

GKN plc (GKN) is UK listed company. It operates a global engineering business, principally in the automotive and aerospace sectors. Through its UK subsidiary, ACT, GKN develops and manufactures a range of cockpit transparencies and associated products for aircraft and produces coatings for aircraft transparencies. In the year to 31 December 2002, ACT's worldwide sales in aircraft transparencies were approximately [see note 1].

Pilkington plc (Pilkington) operates an aerospace division comprising of four subsidiaries based in Brazil, England, Thailand and the USA. Its UK subsidiary, Pilkington Aerospace Limited (PA), manufactures aircraft transparencies for military and commercial aircraft and produces coatings for aircraft transparencies. In the year to 31 March 2002, PA's UK turnover was around [see note 1].

TRANSACTION

GKN proposes to acquire the entire issued share capital of PA and all outstanding shares of the common stock of Pilkington Aerospace Inc. The transaction is conditional upon merger clearance in the UK and Brazil.

The transaction was notified by GKN on 22 July 2003. The 40 working day administrative deadline expires on 1 October 2003.

ASSESSMENT

The transaction qualifies in respect of the share of supply test of the Act and the parties overlap in the supply of transparencies for use in military and commercial aircraft.

It has not been possible to determine with certainty whether glass and plastic transparencies are substitutable. However, in this case, it has not been necessary to reach a firm view of the relevant product market. As a result of the merger, the parties will be one of only two remaining suppliers of transparencies in the UK. However, it appears that transparencies are supplied on a worldwide basis and the parties will continue to face significant competition from six other major suppliers. As contracts are awarded subject to a competitive bid process, it would appear that customers are likely to possess significant negotiating strength and are able to secure lower prices through the threat of switching. Most third parties were also unconcerned.

For the above reasons, the merger is not 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.

NOTES

1. Figure excised at parties' request

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