London, UK 1/21/19-—The UK’s Competition & Markets Authority (CMA) has published the full text of its decision to review Thermo Fisher Scientific’s planned purchase of Gatan (see IBO 12/31/18). According to the report, Gatan currently supplies Thermo Fisher with cameras, filters and sample holders for electron microscopes (EMs), and, on a less regular basis, specimen-preparation products and detectors. Both companies also supply direction detection (DD) and general imaging (GI) cameras. Gatan sells the peripherals to third parties and end-users, while Thermo Fisher supplies them as part of its EM systems or to its customers. The report named Gatan as the only nonvertically integrated supplier of EM filters globally, as well as a major supplier of DD and GI cameras. In addition, the companies both sell products for specimen preparation.

The CMA document stated, “The CMA has found that there is limited demand- and supply-side substitutability between the different peripherals upstream, and between the different EMs (ie, Transmission EMs (TEMs) and Scanning EMs (SEMs)) downstream. Furthermore, the relevant competitor set and the competitive conditions for the supply of TEMs and SEMs vary depending on which peripherals the end-user needs.” The Authority further concluded, “The CMA has found that the Merged Entity may have the ability and incentive to foreclose competing TEM manufacturers from access to the Target’s filters, DD cameras and GI cameras with the aim of diverting sales to Thermo Fisher’s TEMs.”

The CMA reported that third parties are concerned about access to such peripheries following the merger, writing, “The CMA therefore believes that the Merger gives rise to a realistic prospect of a substantial lessening of competition (SLC) as a result of vertical effects arising from foreclosure in the supply of filters, DD cameras and GI cameras to competing TEM manufacturers at a worldwide level.” Discussing the horizontal effects of the merger, the document stated the Authority “found that the Merged Entity will have a high combined share in the supply of DD cameras ([70-80]%, including Thermo Fisher’s self-supply), with only one other supplier of DD cameras remaining after the Merger.”

The CMA also disclosed that Thermo Fisher and Gatan have signed long-term supply agreements with TEM suppliers JEOL and Hitachi High-Technologies conditioned on the closure of the merger. But the Authority is disregarding the agreements, stating they are not related to the merger. In addition, the CMA believes the agreements will have no impact on the merger’s potential for limiting other EM suppliers or new companies’ ability to enter the market. A final CMA report is schedule for publication in June.

Asked to comment on the report, a Thermo Fisher spokesperson told IBO, “Regarding Gatan, we continue to work cooperatively with Roper and the CMA and expect to complete the transaction in the back half of the year.”