The decision by the EU Commission does not come as a surprise as Knorr-Bremse has already communicated on 28 June 2017 that it had indications that a Phase II could be initiated.
As confirmed by the EU Commission, its decision to initiate a Phase II investigation does not prejudge the EU Commission’s final assessment at the end of this in-depth analysis. A Phase II investigation is common practice in complex transactions for which the authority requires additional time. The purpose is for the authority to more deeply review data and gather additional evidence in order to confirm or dispel competitive doubts that have been expressed in Phase I. Thereby, the EU Commission will evaluate for which product areas there are factual competitive concerns. It is equally possible that doubts initially expressed are removed during a Phase II. The key question is to what extent exactly competition is significantly affected and which remedies exactly will be required.
If needed and acceptable, Knorr-Bremse is also prepared to divest from product areas which are finally viewed as problematic in Phase II. Thereby, Knorr-Bremse will be able to build on the divestment process already set up in the course of Phase I. Already during Phase I Knorr-Bremse initiated a structured bidding process and, following a due diligence process conducted by the bidders, has received credible confirmed offers by reputable buyers for different product areas. In Phase II, Knorr-Bremse will widen the pool of bidders if necessary. Knorr-Bremse will continue the open dialog with the EU Commission on how to address the concerns and spend all necessary resources to receive merger clearance on acceptable terms as soon as possible.
