EU: EC looking Into Thales’ proposed acquisition of Gemalto

Gemalto, the digital security company that is being acquired by Thales, the French aerospace and defense company, will see the European Commission launch an in-depth investigation into the proposed deal.

Financial Times, citing the European Commission, reported that the European Union is “concerned that the merger could lead to higher prices and reduce choice and innovation for customers of hardware security modules.” According to the report, a hardware security module is a digital security tool that is a standalone hardware appliance that runs on encrypted software to protect data.

When Thales announced its €4.8 billion (US$5.6 billion) deal to acquire Gemalto, it said it planned on combining the digital businesses in Gemalto, and that the Gemalto brand would continue to operate. Combined, it would be one of the top three industry players in digital security.

European Commissioner Margrethe Vestager, who is in charge of competition for the EU, said in a statement that with the world more dependent on data security solutions, it is launching the investigation to ensure that the deal doesn’t lead to higher prices or less choice in the hardware security modules market. The European Commission aims through its investigation to confirm the impact it would have on competition and the ability for software solutions to reach the same level of security as the hardware security modules. The Commission has 90 working days until November 29 to make a decision.

In December, the companies announced the all-cash deal that “marks a key milestone in the implementation of Thales’ strategy,” said Patrice Caine, Thales chairman and CEO. “Together with Gemalto’s management, we have big ambitions based on a shared vision of the digital transformation of our industries and customers. Our project will be beneficial to innovation and employment, whilst respecting sovereign strategic technologies.”

The executive noted that combined, the company is aiming to be a global leader in digital security. Thales has been focusing on digital technologies for the past three years, pouring more than €1 billion (US$1.2 billion) into connectivity, cybersecurity, data analytics and artificial intelligence. The company said that the acquisition and subsequent integration of Gemalto “strongly accelerates” that strategy.

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