Brussels – The European Commission has conditionally approved the $3.3 billion (€3 billion) acquisition of Eaton’s hydraulics business by Denmark’s Danfoss A/S.
In an 18 March statement, the commission said it had concerns that the merger would harm competition, due to the combination of both companies' hydraulic components businesses for mobile machinery, also known as “mobile applications.”
The commission said its in-depth investigation found that the transaction would lead to “a reduced choice in suppliers, as well as higher prices, for certain hydraulic components for mobile applications.”
The products concerned include hydraulic steering units (HSUs), electrohydraulic steering valves (ESVs), and orbital motors, the EC statement added.
“For each of the above hydraulic components the transaction would lead to high combined market shares, in already concentrated markets, where limited credible alternative suppliers to the companies are present,” it added.
To address the competition concerns, Danfoss has offered to divest parts of its HSU, ESV and orbital motors businesses.
These include Danfoss plants in Wroclaw, Poland; Parchim, Germany and Hopkinsville, the US, said the European Commission's statement.
The structural divestiture will be complemented by the transfer of Eaton's production lines for medium power orbital motors (HP and VIS models), Eaton's Series 10 production line for HSUs, and production assets for Eaton's ESV portfolio, to the Hopkinsville plant.
Danfoss also committed to transfer additional Danfoss and Eaton technology for HSUs to the divested business, in order to enhance its competitiveness.
“Danfoss and Eaton are both leading players in hydraulic components globally. Manufacturers of agricultural and construction machinery depend on these components for manufacturing innovative and price competitive products,” said European Commission executive VP Margrethe Vestager, in charge of competition policy.
“Thanks to the commitments offered by the two companies, these customers will continue benefit from competitive prices and have choice of innovative products,” she added.
Power management company Eaton Corp. agreed to sell its hydraulics business to Danfoss in January 2020.
The business, which makes hydraulics components, systems and services for industrial and mobile equipment, had sales of $2.2 billion in 2019.
Among others, the unit manufactures a hydraulic hoses and hose fittings for a variety of applications.
The business employs about 11,000 people.