Rail wagon leasing companies may merge subject to condition precedent

21.03.2018

The Bundeskartellamt has cleared the acquisition of CIT Rail Holdings (Europe) S.A.S. by VTG Rail Assets GmbH subject to a condition precedent. The companies may only implement the merger once they have sold a substantial part of the target company to an independent third company.

VTG and CIT are active Europe-wide in the lease of rail freight cars. The target company CIT is known under the brand name "Nacco". The rail freight cars are hired by large industrial customers, logistic services providers and also railway companies like Deutsche Bahn. Under competition law the leasing business is a separate market from the actual transport services which are ultimately carried out by the hirers of the freight cars.

Andreas Mundt, President of the Bundeskartellamt: "We can only clear the merger on the condition that before it is implemented a substantial share of the business is sold to an independent third company. VTG is already the largest supplier on the markets affected in Europe. Our investigations have shown that Nacco, one of the few remaining medium-sized freight car leasing companies offering a wide range of freight cars, is a close competitor of VTG. Since VTG has already acquired several of its competitors in recent years, it was expected that its complete acquisition of Nacco would create a dominant position for VTG."

The parties to the merger have undertaken to hive off the entire business of Nacco's German and Luxemburg subsidiaries and a certain number of additional freight cars before implementing the merger. With this transaction an essential part of Nacco's core business with very important customers and a high competitive potential is to be sold. This assessment was confirmed by an extensive survey of market participants ("market test") which were asked to comment on the commitment offer submitted by the merging companies. A purchaser which is independent of the parties now has to be found to acquire the hived-off part of Nacco's business. The purchaser has to fulfil certain qualifications to ensure that sufficient competitive pressure continues to be exerted on the merged entity.

In 2015 the Bundeskartellamt cleared the acquisition of Ahaus-Alstätter Eisenbahn Holding AG by VTG in the first phase of merger control. (A Case Summary on this proceeding is available on the website of the Bundeskartellamt).

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