Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: Aircraft parts maker Parker conditionally approved to acquire Meggitt, (Apr 12, 2022)

By Peter Reap, J.D., LL.M.

The U.S. company Parker will divest its wheels and brakes division to complete the transaction.

The European Commission (EC) has approved the proposed acquisition of Meggitt by Parker-Hannifin Corporation (Parker). The approval is conditional on full compliance with commitments offered by Parker. Both companies are leading global aerospace component suppliers, with wide product portfolios. They compete among others in the design, manufacture and supply of aircraft wheels and brakes and aerospace pneumatic valves.

The proposed £6.3 billion (approximately $8.8 billion) cash acquisition was announced in August 2021. Parker, a U.S. company, is active globally in the design, manufacture and supply of motion and control technologies and systems, and in the provision of precision engineered solutions for a variety of mobile, industrial and aerospace markets. UK company Meggitt is active globally in the design, manufacture and supply of components and sub-systems for aerospace and defense markets, and selected energy applications.

EC investigation. The EC investigated the impact of the proposed acquisition on competition in the markets for the design, manufacturing and supply of aircraft wheels and brakes for certain types of aircraft. It was revealed that the transaction would further reduce the already limited number of suppliers of wheels and brakes for small general aviation aircraft, business jets, civil and military helicopters, and military fixed-wing drones. The merged entity would have been further strengthened as the largest supplier in these markets. This would have impacted the prices and innovation in these important components. Competitors generally have a smaller presence in the supply of wheels and brakes for these aircraft types and often do not offer all types of brakes, according to the EC.

The EC did not find competition concerns in other aerospace component markets in which the parties compete, including aerospace pneumatic valves, as sufficient alternative suppliers would remain active following the transaction.

Commitments offered. Parker agreed to divest its entire aircraft wheels and brakes division in order to resolve the EC’s competition concerns. The commitments include the divestment of Parker's plant in Ohio, and a range of provisions to ensure that a buyer can operate the business viably and independently from the merged entity.

The EC was satisfied that these commitments fully remove the overlaps in the design, manufacturing and supply of aircraft wheels and brakes between Parker and Meggitt, globally. The commitments therefore ensure that the current level of competition is maintained in the markets where the Commission identified competition concerns, thus preserving customer choice.

Vestager comments. “Manufacturers of civil and military aircraft depend on competitive supply chains for all aerospace components,” said Executive Vice-President Margarethe Vestager, in charge of competition policy. Parker and Meggitt are leading global suppliers of wheels and brakes for a range of aircraft types, including military helicopters and drones. The remedy package offered by Parker will preserve competition in these markets and ensure that aerospace and defence customers have access to sufficient choice of component suppliers and will continue benefitting from competitive prices.”

Prior acquisition received Justice Department attention. In 2018, a modified final judgment, resolving Department of Justice Antitrust Division concerns over Parker’s acquisition of CLARCOR Inc. for substantially lessening the competition in markets for aviation fuel filtration products in the United States, was approved by the federal district court in Wilmington, Delaware. Under the terms of the final consent decree, Parker was required to divest the Facet filtration business, including the aviation fuel filtration assets that it acquired from CLARCOR Inc.

Companies: Parker-Hannifin Corporation; Meggitt; CLARCOR Inc.

News: AcquisitionsMergers Antitrust GCNNews