Fincantieri gives up the acquisition of Chantiers de l'Atlantique
After three years of serious attempts to forge an alliance between Italy and France aimed at creating a strong European shipbuilder able to compete in the World market, the project has been abandoned at the beginning of 2021, because of the EU Commission’s still outstanding investigation on the possible infringement of EU merger and fair competition rules.
The preliminary sale agreement of February 2018 by and between the Italian company Fincantieri and the French company Naval Group, which provided for the sale to Fincantieri of 50% (plus the loan of a further 1% in order to grant the corporate control of the target company) of the shares of Chantiers de l’Atlantique, has therefore finally expired at the beginning of this year, missing any renewal or extension thereof.
Besides the EU Commission’s failure to finally grant its approval to the proposed acquisition, the project has been abandoned also because of the COVID-related problems which are seriously affecting international tourism and the prospects of successful marketing on new cruise ships in the near future (while such prospects were much brighter when Fincantieri launched its initial acquisition in 2017).
Fincantieri is Europe's largest shipbuilder, and among the 10 largest ship manufacturers worldwide. Chantiers de l'Atlantique is a French shipbuilding company, the bulk of whose capital is held by the French State (which controls the Naval Group), and since 2017 Fincantieri has tried to buy its control, through hard negotiations with the French Government bringing to the above cited sale agreement.
Notwithstanding the foregoing, in January 2019, the EU Commission agreed to the request submitted by France and Germany asking it to look at Fincantieri's proposed acquisition of Chantiers de l'Atlantique in the light of the EU Merger Regulation, which under Article 22(1) allows Member States to request that the Commission examine a concentration that does not have an EU dimension but affects trade within the single market and threatens to significantly affect competition within the territory of the Member States making the request. Since then, the EU Commission’s investigation has been pending without coming to any final finding and/or conclusion, leaving Fincantieri in the widest degree of uncertainty while the World economic situation has suddenly worsened in the last couple years because of the COVID-19 crisis.
According to the EU Commission’s press releases, the proposed acquisition of Chantiers de l'Atlantique by Fincantieri could harm competition at European and global level, even if it did not reach the turnover thresholds set by the EU Merger Regulation for transactions notifiable to the European Commission in connection with their European dimension.
The proposed acquisition plan had been already notified for authorization in France and Germany, but the French Government submitted a referral request pursuant to Article 22(1) of the EU Merger Regulation, which provision allows EU Member States to request that the Commission examine a concentration that does not have an EU dimension, but still affects trade within the single market and threatens to significantly affect competition within the territory of the Member States making the request.
Germany – where the strongest European competitor of Fincantieri is located - joined the referral request submitted by France, and on the basis of the information provided by those two Governments, and without prejudice to the outcome of its exhaustive investigation, the EU Commission made public in its considerations that such transaction could significantly harm competition in shipbuilding, in particular in the global cruise ship market. That has been sufficient to block the acquisition.
The EU Commission has been investigating this matter pursuant to EC Merger Regulation entered into force on 21 September 1990, which introduced into EU competition law a legal framework for the systematic review of mergers, acquisitions, and concentrations. It is intended to permit effective control of all concentrations in terms of their effect on the structure of competition in the European Union, and it applies to lasting changes in control.
The concept of a concentration includes mergers, acquisitions, and the formation of jointly controlled, autonomous, full-function J.Vs.. The concept of control is defined as the possibility to exercise “decisive influence”.
Absent a derogation, reportable concentrations may not be implemented until they have been finally approved, and, in cases of breach, the Commission may take remedial action, inclusive of blocking the acquisition and/or imposing fines and sanctions.
The EC Council Regulation No. 139/2004 of 20 January 2004 on the control of concentrations between undertakings (the most recently amended EC Merger Regulation) allows pursuant to Article 22 any Member State (like France and Germany in this case) to request the EU Commission to open and investigation over a concentration. In summary, the French Government on the one side entered into a preliminary sale agreement with Fincantieri three years ago to sell to the Italian company 50% (+1) of the shares of Chantiers de l’Atlantique, on the other side promptly thereafter denounced such prospective acquisition to the EU Commission, complaining that it could result into a violation of EU competition rules.
Such failed merger between the two Italian and French companies, has however left the field open to the intervention of some other shipbuilder willing to acquire Chantier de l’Atlantique (which, by itself alone, has been showing too financially weak as to actually compete at international level). The best candidates to such regard are from Asia, having in mind that 9 out of 10 major World manufacturers of ships are located in China, Japan and Korea (Fincantieri is number 10 in such listing).
The obstacles created by the French Government and the EU Commission to the Fincantieri-Chantier de l’Atlantique concentration, may therefore leave the door open to non-EU competitors to in turn propose the purchase of such French shipyard, and from there, to become able to manufacture ships and participate to public tenders directly within Europe.
Prof. Avv. Salvatore Vitale
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