Anticipated acquisition by Atlas Copco AB of Ingersoll-Rand Drilling Solutions

Affected market: Surface mining

No. ME/1051/04

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(1) given on 16 June 2004

PARTIES

Atlas Copco AB (Atlas) is an international construction and mining group based in Sweden. It develops, manufactures and markets a variety of products for sale and rent in the mining and construction industry. The Drilling Solutions Business (DSB) of Ingersoll-Rand Company Ltd (I-R) is a manufacturer and distributor of drilling equipment and consumables to the surface mining, exploration, oil and gas and quarry industries around the world. In the UK it only operates through an independent distributor, Skelair Ltd. For the financial year ended 31 December 2003, the DSB's UK turnover was [less than £2] (see note 1) million.

TRANSACTION

Atlas has proposed to buy the DSB through the purchase of its assets – the only assets being acquired in the UK are [less than £100,000] (see note 1) of stock held by a UK subsidiary of I-R. Post-merger, DSB's UK distributor Skelair will remain independent and be given the opportunity to continue its current distribution agreement with DSB. The extended statutory deadline is 17 June 2004. The transaction has been cleared in the USA.

JURISDICTION

As a result of this transaction, Atlas Copco and DSB will cease to be distinct. The parties overlap in the supply of surface crawlers, spare parts and repair and maintenance of surface crawlers in the UK and the supply of consumables for use with surface crawlers in the UK. The share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met. A relevant merger situation is likely to be created.

ASSESSMENT

The merger results in one firm having a high share of supply of surface crawlers in the UK. Customers were generally unconcerned about the merger, arguing that post-merger they still retain options when sourcing their surface crawlers. These options include the two remaining UK suppliers as well as the possibility of sourcing from suppliers not currently active in the UK. In addition customers appear to possess a degree of counter-veiling buyer power, which should tend to increase as the trend towards contract drilling and therefore larger purchasers of surface crawlers continues.

It appears that pre-merger, Atlas has a more effective means of encouraging its surface crawler customers to buy its consumables than that pursued by the DSB. The merger might therefore make competition for consumables sales more intense. There are no obligations on customers to purchase consumables with the surface crawler, and alternative sources of surface crawlers exist, if customers do not feel that they are being offered a good deal.

Consequently, the OFT does not believe that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

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

NOTES

1. Figures replaced at the request of the parties

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