European Commission conditionally approves Thales acquisition of Gemalto

The European Commission has approved the acquisition of Gemalto by Thales under the EU Merger Regulation, on condition that Thales divest its global nShield business.

Thales nShield products are general purpose hardware security modules (HSMs), a technology both Thales and Gemalto are leading suppliers of, and selling the business addresses EU antitrust concerns. EU competition commissioner Margrethe Vestager launched an investigation into the deal between the security giants in July to examine concerns about price increases and reduced choice and innovation in the field.

Vestager found that the markets for general purpose HSMs and payment HSMs are distinct, and that cloud-based HSMs would not represent a strong competitive constraint on a combined general purpose HSM business of Thales and Gemalto. Gemalto’s limited presence in the payment HSM market makes the merger of that side of the network encryption device business allowable according to EU competition standards.

“The importance of data security solutions to protect critical social, commercial or personal information is increasing,” comments Vestager. “Today’s decision allows the creation of a strong European player in this market, while still ensuring that the merger will not prevent customers from continuing to enjoy fair prices and innovative products. This is because we have approved the deal subject to Thales’ offer of a strong remedy that will fully preserve competition on this important market.”

The EC notes that it cooperated with other national competition authorities, in particular the U.S. Department of Justice, throughout its investigation.

The acquisition deal was originally struck in late 2017, and it has already wound its way through several approvals. The sale of Thales’ nShield business can now probably be considered imminent, and the Gemalto takeover virtually complete.

Meanwhile, Gemalto recently announced that its biometric technology is being used in a pilot for boarding with facial recognition at LAX, and the company won two 2018 Global Company of the Year Awards from Frost & Sullivan.

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