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Siemens’ acquisition of Illinois-based diagnostics company Dade Behring is unlikely to raise major competition issues but in-depth investigations cannot be excluded, according to sources and observers.
A Siemens insider said the company expected to close its USD 7bn transaction by Q2 2008 with all competition approvals - including from US authorities and the European Commission (EC)- to be received by March 2008. More specifically, Siemens expects to receive all green lights between January and March, the insider said, admitting that such a timetable factored a possible Phase II investigation by competition authorities.
Two sources familiar with the deal, however, said they thought the March 2008 deadline reflected the worst-case scenario. The companies’ estimation of a close by three to six months after the announcement date includes any regulatory requirements, said the first source. This would mean a closure of the deal by October-November or January-February and, the source said he thought, clearances should be obtained by then. “Whoever is saying only in 2008 is obviously expecting problems,” he said. “If the companies expected investigations to that extent then we would have not stipulated the three to six months period.”
The EC’s Phase I investigation lasts 25 working days, which would be extended by 90 working days in case of a Phase II. On the other side of the Atlantic, a first request takes calendar 30 days, to which a further 30 days is added in case of a second request.
The second source familiar said he thought the March 08 deadline reflected a “very very conservative view” about the length of the regulatory review, describing it as “the “absolute worst scenario timing”. “Yes the European Phase II can take longer, but the company would have advised if they anticipated that date.”
According to the Siemens insider, the acquisition of Dade, one of the main players in the in-vitro clinical diagnostics market, will allow for high synergies with savings expected to increase from EUR 160m per year as of 2010. The transaction could, however, lead to some small overlaps within some segments in the diagnostic market, he admitted.
Nevertheless, a survey of sector analysts indicated no major competition issues because the companies are seen as complementary and combined market shares are not expected to be very high. One analyst explained Siemens’ plan was to bring together the laboratory and imaging divisions in order to better serve its customers. “Some concerns could occur on some laboratory sub segments but nothing major as the market share will not be too huge in the laboratory segment,” the analyst said.
A report by SG Cross Asset Research and based on figures disclosed by Siemens indicated that the combined entity would become number one in the in-vitro market ahead of Roche. In Chemistry, for example, Siemens market share would reach almost 24% against 19% for Roche and 18% for Abbott. The deal will also enable Siemens to gain strong expertise and top notch technological know-how in all the segments of the in-vitro diagnostic market from prevention to detection, the report pointed out.
A second analyst said he thought no competition issues would arise on the laboratory segment, as he believed the two companies are very complementary and have a good customer base fit. “Siemens and Dade want to create a leading diagnostics company and to do so will concentrate on the Vitro diagnostics market.”
A third analyst also said he thought the businesses to be complementary with Dade Behring being well-positioned within clinical chemistry technology and Siemens being more focused on immunodiagnostics. “They are not in exactly the same lines of business,” he said. According to Siemens, they [the combined entity] would have a 17% market share: this does not seem to indicate a high [competition] risk.”
A US-based competition lawyer, who is not involved in the deal, said he thought in the US, the Federal Trade Commission rather than the Department of Justice would look at the deal and the authority would be familiar with the sector as it has reviewed similar transactions in the past. The assessment will be based on how the market is defined but it’s likely to be based on a narrow approach, he said. If the products are not competing head-to-head and are seen more complementary, parties will likely argue their transaction will enable them to be more efficient by using the same sales force, for example. But even if there are no overlaps right now the competition authorities will want to see if one could have been a new entrant in the other’s market, the lawyer added.
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