The Competition Commission, recently on November 4, 2011, approved the acquisition of BCL Springs Division of Bombay Burmah Trading Corporation Limited (BBTCL) by NHK Automotive Components India Pvt. Ltd. (NHK Automotive), a wholly owned subsidiary of NHK Spring Co. Ltd. (NHK Japan). BBTCL agreed to sell its BCL Springs Division to NHK Automotive as a going concern on a slump sale basis for a lumpsum consideration as per the terms and conditions of a Business Transfer Agreement between the parties. The acquisition came within the purview of Section 5 (a) (i) of the Competition Act, 2002 and was required to obtain the approval of the Competition Commission as per Section 6 of the Act read with the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011.
As might be known, BBTCL belongs to the Wadia group and is engaged in the businesses of plantations, food, textiles, chemicals, electronics and light engineering, healthcare, real estate. The Spring Division, which was under acquisition here, is concerned with the manufacture, sale and distribution of various kinds of springs. In its order, the Commission discussed the automotive components sector in India, including springs manufactured for automobiles and noted that there exist two different markets – one, for original equipment manufacturers, and one for the replacements after-market to meet after-sales requirements. The acquirers and acquired in this case were present in the original equipment manufacturers market, making this the relevant market for the Appreciable Adverse Effect on Competition test. The territorial boundaries of India were considered the relevant geographic market. The order then analyses the market in greater detail, looking for potential overlaps in the markets of the acquired and the acquirers and at the impact on other major players in the market. The Commission laid down the following reasons why there was likely to be no appreciable adverse effect on competition through the acquisition –
As a recap, the sections in the Competition Act relating to combinations i.e. Sections 5 and 6, were brought into force from June 1, 2011 vide a notification on March 4. Subsequently, on May 11, 2011, the Commission issued the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (also effective from June 1, 2011), which deal with procedural aspects of notification of combinations, exemptions and pre-merger notification process under the Act. Since coming into effect, the Commission has approved 6 combinations, including above discussed. The other five are: ·
As might be known, BBTCL belongs to the Wadia group and is engaged in the businesses of plantations, food, textiles, chemicals, electronics and light engineering, healthcare, real estate. The Spring Division, which was under acquisition here, is concerned with the manufacture, sale and distribution of various kinds of springs. In its order, the Commission discussed the automotive components sector in India, including springs manufactured for automobiles and noted that there exist two different markets – one, for original equipment manufacturers, and one for the replacements after-market to meet after-sales requirements. The acquirers and acquired in this case were present in the original equipment manufacturers market, making this the relevant market for the Appreciable Adverse Effect on Competition test. The territorial boundaries of India were considered the relevant geographic market. The order then analyses the market in greater detail, looking for potential overlaps in the markets of the acquired and the acquirers and at the impact on other major players in the market. The Commission laid down the following reasons why there was likely to be no appreciable adverse effect on competition through the acquisition –
- The two parties were involved in two different segments of the original equipment manufacturers market. While BCL Spring division was involved manufacturing springs for the 2-3 wheeled vehicles, NSI was manufacturing springs for 4-wheeled vehicles.
- The processes for manufacturing were different. While BCL used the cold formed production process, NSI used the hot-formed process.
- Prices of the springs manufactured by the two were different.
- The acquired and the acquirers could not be said to be involved in different stages or levels of production in India in respect of their springs for 2-3 wheeled and 4 wheeled vehicles as the two were completely different markets.
As a recap, the sections in the Competition Act relating to combinations i.e. Sections 5 and 6, were brought into force from June 1, 2011 vide a notification on March 4. Subsequently, on May 11, 2011, the Commission issued the Competition Commission of India (Procedure in regard to the transaction of business relating to combinations) Regulations, 2011 (also effective from June 1, 2011), which deal with procedural aspects of notification of combinations, exemptions and pre-merger notification process under the Act. Since coming into effect, the Commission has approved 6 combinations, including above discussed. The other five are: ·
- The merger of AHIL and APIL (approved on 19th October, 2011) ·
- The acquisition of the laminates division of BBTCL by AICA Kogyo Company Ltd. and Aica Laminates India Pvt. Ltd. (approved on 30th September, 2011) ·
- The acquisition of certain assets of Wockhardt Ltd., Carol Info Services Ltd., and Wockhardt EU Operations (Swiss) AG by G&K Baby Care Pvt. Ltd. and Danone Asia Pacific Holding Pvt. Ltd. (approved on 15th September, 2011) ·
- The acquisition of UTV Software Communications Ltd. by Walt Disney Company (Southeast Asia) Pvt. Ltd. (approved on 25th August, 2011) ·
- The acquisition of Bharti AXA Life Insurance Co. Ltd. and Bharti AXA General Insurance Co. Ltd. by Reliance Industries Ltd. and Reliance Industrial Infrastructure Ltd. (approved on 26th July, 2011)
No comments:
Post a Comment