On October 31 2011 the Ministry of Commerce posted Notice 73 in its website, announcing the clearance of a proposed concentration between Penelope Co Ltd and Savio Macchine Tessili SpA on certain conditions. The ministry’s reasoning and analysis shed light on its approach to the review of concentrations on anti-monopoly grounds.
The notice states that the would-be acquirer, Penelope, was incorporated specifically as a tool for the transaction. Alpha Private Equity Fund V is Penelope’s wholly-owned controlling shareholder – it invests in non-ferrous metal recycling and the production and sale of textile and home textile machinery. Alpha V is the largest shareholder in Uster technologies Co Ltd, holding 27.9% of the equity shares.
Savio, the proposed target, is a manufacturer of textile machinery. It produces electronic yarn clearers for winders, twisters and rotor-spinning frames. Phenanthrene Brothers Co Ltd is a wholly owned subsidiary of Savio.
In its preliminary investigation the ministry found that Uster and Phenanthrene Brothers are the world’s only two manufacturers of electronic yarn clearers for automatic winders (with market shares 52.3% and 47.7%, respectively). Furthermore, the ministry found that the market for electronic yarn clearers for automatic winders constitutes an independent relevant market. It confirmed the possibility that Alpha V might coordinate the business operations of Uster and Phenanthrene Brothers following the concentration, thereby eliminating or restricting competition in the market; similarly, Uster and Phenanthrene Brothers might engage in anti-competitive practices to eliminate or restrict competition in the market through their intermediary, Alpha V.
In early October 2011 the ministry and the parties to the concentration engaged in several rounds of communication about measures to alleviate the ministry’s competition concerns. The final consensus was sufficient for clearance by the ministry on the following conditions. Alpha V must:
- transfer its equity in Uster to one or more independent third parties within six months;
- inform the ministry of the identity of transferee, the transaction volumes and the trading date, in order to ensure that the transfer does not result in the further elimination or restriction of competition;
- refrain from participating in or influencing Uster’s business operations before the transfer; and
- appoint an independent supervising trustee to supervise the equity transferee.