European Commission conditionally approves the acquisition of Embraco

The new Japanese owner will have to sell its second plant manufacturing the same products.

The Japanese firm Nidec purchased the Brazilian company Embraco in April 2019. The EC investigated whether the acquisition would distort the competition. The Japanese firm Nidec purchased the Brazilian company Embraco in April 2019. The EC investigated whether the acquisition would distort the competition. (Source: SITA)

Japanese company Nidec can take over Embraco, a producer of refrigeration compressors situated in Spišská Nová Ves (Košice Region). The European Commission has approved the acquisition, but with several conditions, the SITA newswire reported.

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American company Whirlpool sold Embraco to Nidec last year. However, to complete the deal, the latter will have to get rid of its plant situated in Zlaté Moravce (Nitra Region), which also produces refrigeration compressors. This was a condition from the EC, that addresses concerns about a potential violation of competition rules, SITA wrote.

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One dominant player

Read also: Embraco Slovakia changes hands Read more 

Nidec produces refrigeration compressors through its subsidiary Nidec Global Appliance. While Nidec employs 1,200 people in Slovakia, 2,300 people work at Embraco, Korzár wrote.

Both companies are close competitors and the biggest, if not the only, players on the market that sell variable speed refrigeration compressors for households and commercial purposes, reads the EC's press release.

The EC has been worried that the transaction would create a single dominant manufacturer of this type of compressor, both on the European and world markets.

The EC thus started an investigation in November 2018, looking into whether the deal between Whirpool and Nidec, made in April 2018 and worth $1.08 billion, violates the competition rules.

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Compressors are everywhere

People may not be familiar with compressors, but they are everywhere. For example, they are at the heart of fridges and freezers in every household. The demand for these compressors is to rise sharply in future, the EC claims.

Thus, to avoid establishing a global monopoly, the EC stated conditions Nidec has to comply with before the transaction can be completed.

Read also: Italy points to “illegal state aid” as Embraco announces relocation to Slovakia Read more 

“The conditions under which we have approved Nidec's acquisition of Embraco ensure that effective competition will continue in this sector,” said European Commissioner for Competition Margrethe Vestager, as quoted in the EC's press release.

Divestment of business

Nidec will have to divest its current compressor manufacturing halls in Zlaté Moravce, as well as in Austria and China, which were acquired from the German producer Secop in 2017, SITA wrote.

Only then could Nidec obtain the Embraco plant in Spišská Nová Ves, alongside other manufacturing halls in Mexico, Brazil and Japan.

Industrial customers and consumers should not be harmed by higher prices or less choice, Vestager added, as stated in the EC's press release.

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