Veyance acquisition by Continental is approved by CADE

The Administrative Council for Economic Defense – CADE approved with restrictions on 29 January 2015 the acquisition of the control over Veyance Technologies Inc. by Continental Aktiengesellschaft. The companies manufacture auto parts, rubber products, hoses, industrial equipments, among other products.

The approval of the transaction (Merger file no. 08700.004185/2014-50) is conditioned to the fulfillment of measures foreseen in a Merger Control Agreement (ACC for its acronym in Portuguese) signed between CADE and the parties.

According to Reporting Commissioner, Ana Frazão, the merger has potential to create exercise of market power in the markets of heavyweight steel conveyor belts (used in mining, steel, and construction sectors) and air springs (used as parts of the suspension system of heavy load vehicles).

In both sectors, the acquisition of Veyance by Continental represents the merger between the leader company and its third major competitor. Together, they would have more than 50% of market share.

To mitigate the identified competition problems, the companies signed an agreement with CADE committing to divest Veyance’s plant located in San Luis Potosi, in Mexico, which produces air springs. It was also established the divestment of the heavyweight steel conveyor belts’ factory in São Paulo, which also belongs to Veyance.

In regards to the air springs market, the ACC foresees the same commitments made with the United States as a requirement to the approval of the transaction in Brazil. This requirement had also been determined in Canada and in Mexico. However, to assure the divested business’ feasibility, the agreement signed with CADE not only covers the plants, but it also includes intangible assets, such as brands, customer contracts, software, etc.

“The divestment will enable the entrance of an important player capable to effectively compete in the market and to challenge a possible abusive exercise of dominant position”, explained the Reporting Commissioner.

The maximum deadline to the plants’ divestment is confidential. During the divestment period, the business must be managed by independent trustees in order to assure competitiveness and feasibility until the conclusion of the divestment to a third-party.