The Bundeskartellamt has today prohibited the proposed acquisition of all the shares in HB Vermögensverwaltungsgesellschaft mbH & Co. KG by Heidelberger Druckmaschinen AG. HB Vermögensverwaltungsgesellschaft is the sole shareholder of the folding machine manufacturer MBO Maschinenbau Oppenweiler Binder GmbH (MBO group). The merger affects the market for special machines for the manufacture of sheet folding machines for industrial printing processes.

Andreas Mundt, President of the Bundeskartellamt: “By acquiring the MBO group the market leader Heidelberger Druckmaschinen would take over its main competitor. There are already only four companies active on the relevant market throughout the whole of Europe. The merger would create a dominant position for Heidelberger Druckmaschinen and significantly impede competition in the market to the detriment of customers. We have conducted very intensive investigations into the market. We carefully considered the relevant economic market definition and found that from a customer perspective industrial sheet folding machines constitute a single product market.”

In the printing industry processing is divided into three different stages: pre-print stage, printing process and print finishing. Print finishing is the last stage in the production of a printed product. During this stage the product gains its final form. A range of specialised machines are used in this process. Apart from the sheet folding machines concerned in this case, these include e.g. cutting machines, collating machines, gluing or stitching machines. Industrial sheet folding machines are used to fold printed paper or book-binding paper and are therefore an essential product for sheet-fed offset printing, especially for folded products such as e.g. books, brochures, business reports, advertising flyers or folders, so-called commercial job printing.

On the basis of its extensive market investigations the Bundeskartellamt has established that industrial sheet folding machines form a single product market and that so-called mailing systems, inline finishing systems and combined finishing machines belong to separate markets. However, a further division of the market for industrial sheet folding machines according to the different formats and performance levels is not justified because from the customers’ perspective the different machines are substitutable and can be flexibly deployed.

Heidelberger Druckmaschinen AG’s major product area is the manufacture of sheet-fed offset printing machines. It is the global leader in this market. Apart from printing machines the company also produces machines used in print finishing such as the sheet folding machines concerned and machines for print plate imaging (pre-print stage).

The MBO group specialises in sheet folding machines for industrial applications and folding machines with peak performance or speed levels. The group also offers further products for print finishing.

Heidelberger Druckmaschinen is already the market leader on the European market for sheet folding machines. With the merger the parties would have achieved joint market shares far exceeding 50 percent. Also, the European market for sheet folding machines for industrial applications is highly concentrated. From the perspective of the customers questioned by the Bundeskartellamt (predominantly printing houses, book binders and other specialised companies in this area) the only companies other than the parties to the merger which could be considered as competitors are the German GUK-Falzmaschinen Griesser & Kunzmann GmbH & Co. KG and the European subsidiary of the Japanese company Horizon. Furthermore, Heidelberger Druckmaschinen and the MBO group are the two closest competitors in the differentiated product market.

Apart from Horizon, no non-European competitors are active in Europe. Although the German and European manufacturers are active worldwide, American and Asian manufacturers of sheet folding machines only export an insignificant volume of machines to Europe and are mainly unknown to the customers questioned.

The investigations also showed that market entry seems difficult due to the high costs and time involved, the high level of customer loyalty and the customers’ requirements for prompt service and spare parts supply. In fact no market entries were witnessed in the last 20 years.

The prohibition decision is not yet final. The parties have a month to appeal against the decision to the Düsseldorf Higher Regional Court.