Following an in depth investigation of the markets for aero engines, avionics and other aircraft components and systems, the European Commission has decided to prohibit the proposed $43 billion acquisition by General Electric of Honeywell. The Commission concluded that the merger would make the combined company too dominant in certain markets, particularly aerospace, with the effect of severely weakening competition, and raising prices, and that the remedies proposed by GE were insufficient to resolve concerns about competition.
European Competitions Commissioner Mario Monti emphasised that the EU had worked closely with the US antitrust authorities and that although each authority had reached different conclusions this was not the result of commercial decisions in one place and political decisions in another – simply that interpretations had disagreed. He added that the concerns expressed by the EU might have been dealt with in negotiation, but that the companies were not able to agree on a solution.
This and remarks by other officials involved in the investigation have fuelled speculation that GE were losing interest in the merger in early June, possibly because the task of integrating the two huge companies was simply too daunting. This point still has some significance, because the extent to which GE continued to push for a compromise with the EU would be crucial if Honeywell decided to sue GE for breaching their agreement to merge. The agreement requires GE to make reasonable best efforts to complete the takeover, and continues in force until November 30.
GE has stated that it made a final effort at compromise on June 27, but that it was rejected by the Commission, which it says had seemed to set itself against the deal from the outset. An EU Commissioner however stated that at the last meeting on June 13 the GE chief executive Jack Welch had seemed to be mapping out concessions on the basis of what would satisfy the requirements of the merger agreement rather than what would satisfy the Commission.
This is the first time that a proposed merger between two US companies has been blocked by the EU alone.
