Coming as no surprise, the U.S. Justice Department on Thursday said it will require Britain’s Smiths Group to divest the explosives trace detection (ETD) of Morpho Detection as a condition for approving Smiths pending $710 million acquisition of Morpho from France’s Safran Group.
The Justice Department’s condition for the deal follows one earlier this year by European regulators, who also are requiring Smiths to divest Morpho’s trace business to allow the acquisition to proceed.
Regulators want to ensure robust competition in the U.S. and in Europe for the ETDs, which are used to help in the screening of airline passengers and their baggage, aviation cargo, and to protect other critical infrastructures worldwide. China’s NucTech also sells ETDs.
In response to European authorities’ concerns about allowing Smiths to consolidate its existing trace business with Morpho’s, Smiths Group said in January that it would divest Morpho’s explosive trace detection business.
“The acquisition, as originally proposed, would have eliminated one of only three suppliers of desktop explosive trace detection devices in the United States, and these devices play a critical role in ensuring the safe transport of passengers and cargo at our nation’s airports,” Brent Snyder, acting assistant Attorney General for the Justice Department’s Antitrust Division, said in a statement. “Today’s settlement will ensure that the Transportation Security Administration and other desktop explosive trace detection purchasers continue to enjoy the benefits of vigorous competition when they purchase these vital security screening products.”
OSI Systems’ [OSIS] Rapiscan Systems division is considered a potential buyer for Morpho’s trace business although the company previously passed on acquiring Implant Sciences, which supplies handheld and desktop ETDs worldwide.
Once the acquisition is finalized, Morpho Detection will still provide Smiths Group’s Smiths Detection business with a well-established product line for computed tomography-based explosive detection systems used at airports worldwide to automatically screen checked baggage for explosives.
Smiths, Morpho and Massachusetts-based L3 Technologies [LLL] are the only suppliers in the U.S. of desktop ETD systems. Currently the Transportation Security Administration operates desktop ETDs supplied by Smiths and L3 although in the past it has acquired the systems from Morpho.
L3 acquired Implant Sciences last year to enter into the trace business.
Once the acquisition closes, Smiths will have a comprehensive suite of imaging and detection systems for transportation and critical infrastructure protection.