Tuesday, November 17, 2009

Canon Wants to Close Océ deal by Christmas - Konica/Minolta Loosing Océ Alliance

The proposed takeover of Dutch Océ by Canon has been notified for merger clearance with the European Commission today, this newswire has learned. The deadline for the phase I investigation is 22 December, just before the EC shuts its offices for the Christmas break.

Today's notification is in line with the timetable given by an Océ representative talking to this newswire yesterday. The representative had said clearance is expected before Christmas. Independent lawyers noted however, that the review period would be extended by 10 working days if the companies needed to offer remedies in due course of the investigation. In such a scenario, a decision would not come before January 2010.

Two European independent competition lawyers and an economist advising in merger control investigations all thought that the deal was not likely to raise serious antitrust concerns. They also thought that sticking with the pre Christmas timeline for clearance was possible if the pre notification talks between the merging parties and the EC had reached an advanced stage already.

However even if the companies had only minor overlaps, as Canon and Océ claimed yesterday, the EC might want to look at several areas where anti-competitive effects might occur, the experts warned.

One aspect was the relationship between Océ, Konica and Minolta. Océ CEO Van Iperen had said yesterday that there was a small overlap, although very limited, but that Océ mostly sells Konica/Minolta products in that segment. “This is certainly a relevant aspect of the investigation,” one of the lawyers commented.

The experts did however highlight a number of potential outcomes of an investigation in this aspect. One of the lawyers suggested Océ/Canon might have to end the business relationship with Konica and Minolta, if the market test indicated anti-competitive effects of all companies acting together. He noted however that this was speculation and would depend on market shares. In some previous cases the EC had demanded termination of similar arrangements.

But the economist said an opposite conclusion could not be ruled out: He suggested the investigation could find that Konica and Minolta would be forced out of certain markets, if Canon did not wish to continue the business relationship by the two with Océ. In this case a remedy might be to guarantee continuation of the arrangement for a certain time, to give Konica and Minolta the opportunity to find an adequate partner to replace Océ.

Furthermore, both lawyers agreed, even if overlaps were small the EC might ask if the merging parties were potential new entrants in each other's market. But both lawyers considered this to be an unlikely problem. The first one said such an argument by the EC would have to be based on firm plans to enter those markets. The other lawyer questioned if Océ would have the financial power for such a move.

The economist highlighted that Canon is not planning redundancies at Océ after the takeover. “They try to position it as a complementary deal. And the fact that they do not expect job losses seems to confirm that. If there were large overlaps you would think they would integrate sales functions and those kind of operations,” he said.

The overall sentiment was that a phase I clearance was achievable, and getting it before Christmas would be possible if the parties had engaged in intensive conversations over the past few weeks. In this case the companies might have a very good idea of potential areas of concern, and could structure the deal at the initial phase I filing accordingly.

The Océ CEO had confirmed yesterday that pre notification talks with the European regulator had been under way already. The economist and the second lawyer both thought that the printing markets were likely to be European, and that a number of serious competitors were around while none of them holds a dominant position. All these were considered arguments indicating limited anti-competitive effects of a takeover of Océ by Canon.

Add to Technorati Favorites

No comments: