Antitrust Law Daily U.S. Consent Decree Permitting Merger of Aircraft Component Makers Approved
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Tuesday, June 4, 2013

U.S. Consent Decree Permitting Merger of Aircraft Component Makers Approved

By Jeffrey May, J.D.

Ten months after the Department of Justice Antitrust Division announced a settlement permitting United Technologies Corporation (UTC) to proceed with its now completed $18.4 billion acquisition of Goodrich Corporation, the federal district court in Washington, D.C. has approved the consent decree. The consent decree resolves a civil suit, alleging that the acquisition, as originally proposed, likely would have substantially lessened competition in the worldwide markets for several critical aircraft components, namely large main engine generators, aircraft turbine engines, and engine control systems for large aircraft turbine engines (U.S. v. United Technologies Corp., May 29, 2013, Jackson, K.).

UTC produces a wide range of products for the aerospace and other industries, including, among other products, aircraft generators, aircraft engine control systems and components, aircraft engines, and helicopters. UTC’s main aerospace divisions are Pratt & Whitney, Hamilton Sundstrand, and Sikorsky.

Prior to the acquisition, Goodrich manufactured a variety of products for the aerospace industry, including, among other products, aircraft generators, aircraft engine control systems and components, landing gear, and actuation systems.

In its complaint, the government alleged that the proposed transaction would combine the only two significant suppliers of large main engine generators for aircraft in the world. An aircraft electrical generator is a device that converts some of the mechanical energy created by an aircraft engine into electrical power used by communication and navigation equipment and other aircraft systems.

UTC also would acquire Goodrich’s engine control systems business, which supplies critical components to several of UTC’s leading competitors for aircraft turbine engines. Finally, UTC, which was one of three leading suppliers of engine control systems for large aircraft turbine engines, would acquire Goodrich’s 50 percent share in a joint venture that forms one of the other two producers of such engine control systems.

The consent decree is intended to preserve, through divestitures, the current state of competition in the development, manufacture, and sale of large main engine generators, aircraft turbine engines, and engine control systems for large aircraft turbine engines.

It requires UTC to divest the following assets: (1) Goodrich’s business that designs, develops, and manufactures large main engine generators for aircraft, including Goodrich’s shares in TRW-Thales Aerolec SAS (Aerolec); (2) Goodrich’s business that designs, develops, and manufactures engine control systems; and (3) Goodrich’s shares in Aero Engine Controls (AEC), a joint venture to manufacture engine control systems for large aircraft turbine engines.

Under the consent decree, UTC also is required to: (1) extend the term of certain contracts held by customers of Goodrich’s engine control systems business for a period of 30 days after the divestiture of the engine control systems business; (2) provide various supply and transition services agreements to the acquirers of the assets being divested in order to assist in the transition of the businesses and allow the acquirers to continue to fulfill obligations of the divested businesses; and (3) extend the period for its joint venture partner, Rolls-Royce Group plc, to exercise its option to acquire the Goodrich business that provides aftermarket services for Rolls-Royce engines equipped with AEC engine control systems.

The consent decree will expire on December 31, 2023.

International cooperation. The Justice Department's investigation of the UTC/Goodrich acquisition has been held out as an example international antitrust cooperation. The U.S. worked with the EC, the Canadian Competition Bureau, the Mexican Federal Competition Commission, the Brazilian Administrative Council for Economic Defense, and other authorities in approving the deal. The cooperation permitted a resolution of the case involving divestiture of assets located in the United States, Canada, and the United Kingdom. The Justice Department has pledged to cooperate with foreign counterparts as appropriate in implementing the remedies provided in the consent decree.

This is Case 1:12-cv-01230-RC.

Attorneys: Kevin C. Quin for U.S. Department of Justice Antitrust Division. Andrew H. Marks (Coffey Burlington) for United Technologies Corp. William Randolph Smith (Crowell & Moring LLP) for Goodrich Corp.

Companies: United Technologies Corp.; Goodrich Corp.

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