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The chairman and CEO of General Electric Co., John “Jack” Welch Jr., is scheduled to meet today with European Commissioner for Competition Mario Monti, Europe’s top antitrust official, and present concessions to facilitate quick approval of the company’s $45 billion purchase of Honeywell International Inc. European regulators may by then already have a sense of the deal’s chances for speedy approval, since lawyers for the companies are expected to detail the plan in a meeting with Commission officials Friday. Clifford Chance is filing Fairfield, Conn.-based GE’s regulatory notification, while Morristown, N.J.-based Honeywell is turning to law firm Skadden, Arps, Slate, Meagher & Flom for counsel. The Commission, the EU’s executive agency and merger clearinghouse, will have until about March 20 to study the concessions. It may then decide to grant GE early antitrust clearance or launch an in-depth review that would add four months to the process. Although the deal involves two U.S. companies, the Commission must review it because it triggers minimum sales thresholds established in the EU’s merger regulations. Those annual thresholds are 250 million euros ($227.4 million) in European sales for each company involved in a merger and combined global sales of 5 billion euros ($4.5 billion). One source familiar with the review said the Commission is looking at GE’s power as a conglomerate. As a jet-engine manufacturer, GE holds, on average, 50 percent of the market, depending on the size and type of engine, with the rest of the market shared among competitors such as Pratt & Whitney and Rolls-Royce Corp. Honeywell, however, is an avionics-products maker. While combining these two creates no vertical or horizontal overlaps — the Commission’s usual yardsticks for antitrust concerns — GE’s activities in the market of leasing aircraft are raising some complicated concerns. According to the source, the EU is scrutinizing the role of GE’s leasing unit, Capital Aviation Services, or GECAS. Leasing companies such as GECAS are major aircraft buyers because many airlines often opt to lease, rather than buy, their aircraft outright. GECAS’ recent European customers, for example, include Britain’s Virgin Atlantic and Italian carrier Alitalia. Commission officials are studying whether GE’s leasing activities, coupled with Honeywell’s avionics products, can influence aircraft-market buying patterns. According to the source, commercial airframe makers such as Boeing Co. and Airbus, whose aircraft are fitted with GE’s engines and Honeywell’s avionics products, have not filed complaints against the deal nor have airlines that lease from GECAS. But this may be because they can pass off any anti-competitive effects to consumers, the source noted. While in some cases the Commission has an idea of what remedies are necessary to clear a deal, this is not one of them. One reason: The Commission itself isn’t clear about how the deal would affect competition. According to an analyst following the deal who asked not to be identified, one possible remedy might be for GE to refrain from bundling GE’s engines with Honeywell’s avionics products in sales contracts. As it is, GECAS’ aircraft are not exclusively fitted with GE engines, so GECAS could easily order aircraft fitted by other avionics makers. These types of remedies, also known as “behavioral remedies,” parallel the EU’s conditions in approving Honeywell’s merger with AlliedSignal Inc. in December 1999, the analyst said. However, according to the source close to the EU’s investigation, the Commission is more inclined in this case to accept “structural divestments,” such as an offer to sell assets, rather than behavioral ones. Structural divestments include asset selloffs and are generally preferred because they need not be monitored, as behavioral commitments. The Commission must, in preliminary phase, be convinced that the concessions under offer address all antitrust concerns. Otherwise, it must launch a detailed, four-month probe. EU regulators are cooperating with the U.S. Department of Justice. A decision in the U.S. is expected by the end of March. Copyright (c)2001 TDD, LLC. All rights reserved.

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