ACCC will not oppose Thales-Gemalto deal

The ACCC has decided not to oppose Thales S.A.’s proposed acquisition of Gemalto N.V, after accepting a court-enforceable undertaking from Thales to divest part of its business.

French company Thales and Dutch company Gemalto both supply data security products, including enterprise encryption software and hardware security modules (HSM) in Australia.

The ACCC’s investigation focused on the markets for the supply of general purpose (GP) HSMs and payment HSMs.

The acquisition involves a global transaction and is subject to review by several international competition agencies. During its review, the ACCC liaised closely with overseas agencies, including the European Commission, the US Department of Justice and the New Zealand Commerce Commission.

“Thales and Gemalto are each other’s closest competitors and the two largest suppliers of GP HSMs worldwide and in Australia. The ACCC was therefore concerned about the removal of Gemalto as a competitor of Thales in relation to the development and sale of GP HSMs,” ACCC Commissioner Roger Featherston said.

“We concluded that, without the divestiture undertaking, the proposed acquisition was likely to substantially lessen competition in Australia.”

To remedy these competition concerns, Thales provided a court-enforceable undertaking to sell its global GP HSM business to an ACCC approved purchaser. The undertaking is linked to the commitment made by Thales to the European Commission, reflecting the global nature of the divestiture obligations.

“As a result of the divestiture undertaking, a new or established global supplier will have the opportunity to acquire Thales’ successful nShield HSM brand and assets,” Mr Featherston said.

“While payment HSMs also raised concerns in Australia since the two parties supply the vast majority of Australian customers, the ACCC took into consideration that the market in Australia is very small, the level of global competition, together with declining barriers to entry for international suppliers to enter Australia.”

The ACCC will issue a public competition assessment in due course.

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