EN

Case No IV/M.535 -
Mannesmann Demag /
Delaval Stork

Only the English text is available and authentic.

REGULATION (EEC)No 4064/89

MERGER PROCEDURE

Article 6(1)(b) NON-OPPOSITION

Date: 21/12/1994

Also available in the CELEX database

Document No 394M0535

Office for Official Publications of the European Communities

L-2985 Luxembourg
 COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 21.12.1994

PUBLIC VERSION

MERGER PROCEDURE
ARTICLE 6(1)(b) DECISION

To the notifying parties

Dear Sirs,

Subject : Case No IV/M.535 - Mannesmann Demag/Delaval Stork

Notification of 18.11.1994 pursuant to Article 4 of Council Regulation No 4064/89

1. The above mentioned notification concerns the planned acquisition by Mannesmann

Demag AG (Mannesmann) of all the turbo machinery activities of the U.S. company, Imo
Industries Inc., (Imo) consisting of the Delaval turbine and turbocare Division, and its
50% stake in Delaval Stork V.O.F. (Delaval), a company at present owned by Imo
Industries Inc. and Stork NV.

2. After examination of the notification, the Commission has concluded that the notified
operation falls within the scope of application of Council Regulation No 4064/89 and does
not raise serious doubts as to its compatibility with the common market and with the
functioning of the EEA Agreement.

I. THE OPERATION AND THE PARTIES

3. Mannesmann is active in the development, engineering, production and sales of plants and
machinery, especially in the field of metallurgical plants, construction equipment,
compression equipment and plastic machinery.

4. Stork is a Dutch group mainly active in the fields of systems for textile and paper
finishing, printing form manufacturing, food and beverage industries, meat and poultry
processing and industrial services, including mechanical and electrical contracting,
manufacturing, maintenance and engineering.

5. Delaval is a Dutch company jointly owned by Imo and Stork mainly active in the
manufacturing, sale and maintenance of turbo machinery equipment (compressors and
steam turbines).

Rue de la Loi 200 - B-1049 Brussels - Belgium

Telephone: exchange (+32-2)299.11.11
Telex: COMEU B 21877 - Telegraphic address: COMEUR Brussels
 - 2 -

6. Mannesmann through its American subsidiary and Imo have concluded an Asset Purchase
Agreement on 4 November 1994 whereby Imo will transfer its Delaval Turbine Division,
its Turbocare Division and its wholly-owned subsidiary Deltex Services, Inc to
Mannesmann. This constitutes a separate operation without Community dimension.

7. By conclusion of a separate new Joint Venture Agreement signed 16 November 1994,

Imo is also selling its 50% share in Delaval to Mannesmann's Dutch affiliate,
Mannesmann Beheer B.V.. Delaval will then be controlled jointly by Mannesmann and
Stork. These agreements will bring about a lasting change in the structure of Delaval.
Stork has the right to put for sale at any time after 4 years it's shares in DeLaval, and
Mannesmann have reserved an option to buy. Stork does not have a corresponding right
to demand or to be granted the right to acquire Mannesmann's share holding in DeLaval.

II. CONCENTRATION

8. The Commission cleared the former cooperative structure of Delaval by decisions under
Art. 85(3) of EEC Treaty (OJ No L 215 of 23.08.1977 and renewal OJ No C 255 of
25.09.1987). Turbomachinery equipment manufactured by Delaval was technically
equivalent with Imo's US made products and the parents were considered to be "actual or
at least potential competitors". The structure of the joint venture has been changed as
described below.

a) Joint control

9. The financing of the joint venture and the share of the profits and losses is to be on equal
basis. The parties have agreed to integrate the business policy of the new entity into
Mannesmann's global strategies and organisation for turbo machinery activities. The
general manager of Delaval will be obliged to report continuously to the chairman of
Mannesmann's turbo machinery division. Furthermore, the management of Delaval will
be subject to binding directives and guidelines from Mannesmann's turbo machinery
division. These will concern day to day management and business, including personnel.
Stork is prohibited in the Agreement from acting inconsistently with these guidelines.

10. The election, suspension and dismissal of the members of the board of Delaval will be
proposed by Mannesmann, subject to the agreement of Stork. The internal rules of the
managing Board have to be approved by both shareholders.Under the Agreement, both
parents shall be represented equally within the Partner's Meeting by three representatives,
and each parent has the veto power to block actions concerning annual business plans,
capital investments, and the strategic commercial behaviour of Delaval. Each shareholder
thus retains the possibility of exercising a decisive influence. It follows that Delaval will
be operating under the joint control of Mannesmann and Stork.

b) Concentration

11. Delaval is to be an independent enterprise, with sufficient financial and other resources to
operate on a lasting basis as an autonomous economic entity. It will continue to benefit
from the former Imo's know how and technology which is being transferred to
Mannesmann. DeLaval will further benefit from synergy effects in the fields of
development, design, manufacture, marketing, sales and after sales activities which will
allow it to remain competitive in the market.
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12. The activities of the joint venture are production, sale, and maintenance of compressors
and steam turbines. Stork NV and its subsidiaries are not active in these fields. It would be
costly and commercially unreasonable for Stork to re-enter the market. The acquisition of
turbomachinery products by Stork, only so far as is necessary for other engineering
projects or general contracting, can be regarded as insignificant. Mannesmann, the new
shareholder, is active in the production and sale of turbomachinery. Since Stork has
abandoned activities in this area, the joint venture cannot be used as an instrument for
producing any coordination between the parents. It is therefore not the object or effect of
the concentration to coordinate the competitive behaviour of the parents.

13. Thus the notified operation constitutes a concentration within the meaning of Article
3(1)(b) of the Regulation.

III. COMMUNITY DIMENSION

14. The undertakings concerned have a combined aggregate worldwide turnover in excess of
5.000 million ECU. Both Mannesmann and Stork have a Community-wide turnover in
excess of 250 million ECU but do not achieve more than two-thirds of their aggregate
Community-wide turnover within one and the same Member State. The notified operation
therefore has a Community dimension.

IV. COMPATIBILITY WITH THE COMMON MARKET

a) the relevant product market

15. Process gas compressors are mainly used in special industrial applications where a variety
of basic and compound gases have to be compressed for processing or transmission
purposes. The difference between process gas compressors and standard type compressors
is that process gas compressors are engineered and produced individually according to
customer specifications. Standard type compressors are made according to manufacturer
specifications for a preselected application range. Such compressors only have a limited
overlap with process compressors.

16. There are two types of process gas compressors: positive displacement and turbo
compressors. The parties mainly manufacture turbo compressors. The question of whether
positive displacement and turbo compressors constitute separate product markets could be
left open since, even on the basis of a narrower definition, the operation does not raise
serious doubts as to its compatibility with the common market.

17. Mannesmann and Delaval furnish specialised after sales services for process gas
compressors. As compressors are technically sophisticated, customers purchase after sales
services from the manufacturer. There is no market for third party repair services and
market shares would be parallel to the market shares in the field of manufacture and sales
of process gas compressors. Delaval is also active in the manufacture of steam turbines.
Mannesmann is not active in this business.

b) the geographic reference market

18. Despite the fact that the bulk of compressors is sold in the continent where they are
produced, approximately 20% of the production is exported to other continents. Such
trade flows go both directions, as the technical skills of US, European and Japanese based
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producers are on a comparable level. Main customers of process compressors are
internationally acting engineering companies and general contractors as well as
international oil and gas producers, chemical industry and steel manufacturing. A
distribution network is not required in this business as quotations and supplies are directly
performed between manufacturer and purchaser.

19. As a result geographical markets seem at present to be mainly West European and even
worldwide. The precise delimitation of the relevant geographic market does not need to be
further defined in the present case because even on the basis of a narrower definition, the
operation does not raise serious doubts as to its compatibility with the common market.

V. COMPETITIVE ASSESSMENT

20. Aggregate West European market shares for the new entity will be under [...](1), taking
into account only the turbo process compressors segment. Worldwide market share will
be about [...](1). This includes the activities of the parties in the USA. The effect of vertical
integration (manufacturing of turbines in the case of Delaval) is not of material importance
for the assessment of this case because Delaval is a minor player in the turbines market.

21. Potential market entries are likely as most manufacturers of other turbomachinery
products are in a position to enter the market. The flexibility of producers (of for instance
gas turbines) to expand or shift their production to compressors is to be regarded as high.
Technical or regulatory barriers do not exist. The competitors with higher market shares in
Europe are Nuovo Pignone (General Electric Group) and Sulzer. Other competitors which
are technically and financially strong include MAN, Atlas Copco, Hitachi, Kawasaki, and
Dresser Rand. Thus, the proposed concentration will not create or strengthen a dominant
position in the affected market.

VI. ANCILLARY RESTRAINS

22. The parties to the Delaval Joint Venture Agreement have agreed that companies of the
Stork Group must not compete with Delaval for the running time of the joint venture and a
subsequent period of 3 years. This clause reflects the permanent withrawal of Stork from
the market. A period of three years is recognised as appropriate and the present decision
covers the non-competition clause for such a period.

VI. CONCLUSION

23. For the foregoing reasons the proposed concentration does not raise serious doubts as to
its compatibility with the common market and with the functioning of the EEA
Agreement.

For the above reasons, the Commission has decided not to oppose the notified operation and to
declare it compatible with the common market and with the functioning of the EEA Agreement.
This decision is adopted in application of Article 6(1)(b) of Council Regulation No 4064/89.

For the Commission

(1)
Business secret.