CORRECT: EU Opens In-Depth Probe Of UTC's Proposed Buy Of Goodrich

The European Commission said Tuesday it has opened an in-depth antitrust investigation into United Technologies Corp.'s (UTX)'s $18.4 billion proposed purchase of Goodrich Corp. (GR) on concerns that it could undermine competition in some parts of the aviation equipment sector.

"The Commission's preliminary investigation indicated potential competition concerns regarding the markets for engine controls and AC power generators, where the parties would have very high combined market shares," the commission, which has antitrust powers in the European Union, said.

"The Commission also has vertical concerns concerning the removal of Goodrich as an independent supplier of fuel nozzles and engine controls, as well as in the area of aftermarket services."

The combination of the two U.S.-based companies is relevant because it is one of the largest in recent years in an industry with significant barriers to the entry of new players and whose products are key for security and global economic growth.

The commission now has until Aug. 9 to decide whether to halt or to allow the combination. These 90 working days provide useful time for talks between the commission and the purchasing company, which can propose tweaks in the operation to allay the EU concerns.

The commission is specifically worried that the combination would give the resulting company a "very high" market share in AC power generation, as Goodrich "appeared as the strongest contender to UTC's dominant position and as a potential partner for prospective entrants," it said.

It added that the combination could result in higher input prices for engine makers that compete with UTC's Pratt & Whitney.

UTC owns businesses that produce everything from helicopters and plane engines to elevators and the combination would strengthen its presence in aerospace by increasing the weight of the sector in the company's revenue to roughly half. Goodrich makes aircraft equipment ranging from landing gears to electrical power systems.

In the EU, most mergers and acquisitions are approved without any in-depth probe, but the commission decides to investigate deeper if it is worried that an operation could undermine competition in a specific market. Four other cases are currently being investigated in-depth.

-By Alessandro Torello, Dow Jones Newswires; [phone]; [e-mail]