EC Clears SKF Acquisition of SNFA

The European Commission's Competition Directorate General has cleared the way for SKF AB (Sweden) to acquire SNFA S.A.S. (France). Issuing its decision in this case (M.4062), the EC said, "As the combined entity will continue to face strong competition from major bearing manufacturers, the Commission concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or any significant part of it." Making the determination, the EC made the following market evaluation: In the aerospace sector, the combined entity would become one of the two leading bearing suppliers, next to the German Schäffler Group (FAG/INA). However, aerospace customers, who are able to source bearings on a world-wide basis, have confirmed that a number of other competitors such as Timken, NHBB or SNR is able to supply the main aerospace bearings and would be an eligible alternative in case of a price increase. Therefore, competition would remain effective in the aerospace bearings industry after the takeover. In the machine tool sector, where customers tend to purchase bearings on a European scale, the proposed takeover would likewise enable SKF/SNFA to compete on an equal footing with current market leader Schäffler Group. Both leading suppliers would face competition from a number of other important players, which would continue to be credible alternatives for customers, many of whom are small and medium-sized companies. FAG (Germany) -- and later INA/FAG (Germany) tried to acquire SNFA in 2003, but was thwarted by a variety of EC competition authorities. However, EC approval does not mean SKF's the acquisition will go through as expected. France is currently in the grips of, "economic patriotism," and many foreign acquisitions of French businesses are being blocked by government inquiry or withdrawn after public outcry. Although it is privately held, SNFA is a key defense industry supplier; that may be enough to create a difficult situation for SKF.