September 8, 2011 / 1:13 PM / in 6 years

Western Digital, Hitachi deal under EU microscope

BRUSSELS (Reuters) - EU regulators are taking a thorough look at Western Digital’s bid for Hitachi Ltd’s hard-disk drive business, as it would shrink the number of players in the sector, the EU’s antitrust chief said.

U.S.-based Seagate Technology’s plan to buy the loss-making hard disk drive business of Samsung Electronics Co. for $1.4 billion is also under close scrutiny, EU Competition Commissioner Joaquin Almunia said.

“The sector is already quite concentrated. If both mergers were approved, there would be only three, or perhaps two, players per product market,” Almunia said in the text of a speech to be delivered at the Fordham Competition Conference in New York on Thursday.

“Hard-disk drives are one of the backbones of the digital economy and their demand is forecast to grow significantly in the next few years. So we need to look into these deals really well,” he said.

The European Commission, which opened an investigation into the two cases in May, has set an October 26 deadline for its decision.

Western Digital said in a regulatory filing last month that regulators had formally set out their concerns over its Hitachi deal in a statement of objections. It has appealed to an EU court on procedural grounds.

The Commission is reviewing the Western Digital/Hitachi case based on the assumption that the Seagate/Samsung deal was completed, resulting in one fewer player. The latter deal was notified to regulators ahead of Western Digital’s move.

Almunia also reiterated his concerns over the tight grip a merged Deutsche Boerse and NYSE Euronext would have on trading and clearing of derivatives.

“Our investigation is focusing in several areas, in particular the trading and clearing of derivatives. The NYSE Euronext/Deutsche Boerse deal would give the merged company by far the leading position in derivatives’ trading in Europe,” he said.

Other issues, such as the potential loss of head-to-head competition between the parties, the risk of lower innovation in products and technology, and the impact of the transaction on related markets such as clearing, were also being considered.

The Commission will decide by December 13 whether to clear the merger.

Reporting by Foo Yun Chee, editing by Rex Merrifield

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