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Marine Log

March 20, 2007

EC approves Thales-DCN deal

The European Commission has approved under the EU Merger Regulation the proposed acquisition of joint control of French military shipbuilder DCN by French defense equipment supplier and naval prime contractor Thales and the French State.

The Commission's market investigation concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.

As a result of the transaction, Thales would acquire joint control of DCN, which until now has been wholly owned by the French State.

Thales and DCN already cooperate in many markets via their joint venture company Armaris. Therefore, the competitive impact of the planned transaction would be limited. In addition, a number of effective competitors would continue to operate in the markets concerned after the proposed transaction.

As DCN is a leading naval shipyard and an important customer of Thales, the Commission also looked carefully at whether the vertical integration of Thales might create a risk of cutting off other suppliers of naval equipment or other shipbuilders from the markets. The market investigation, however, revealed that already before the merger, Thales sold the majority of its products to DCN. The change brought about by the merger would, therefore, remain limited.

The investigation found that other shipyards would not be deprived of access to naval equipment after the merger. A sufficient number of competitors supplying naval equipment to third parties would remain available.

The Commission took into account the strong bargaining position of defense ministries, who are the clients in this sector, and are able to influence the sub-contracting process of the prime contractor for equipment.

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