Merger Update - Travis Perkins/BSS Group

The OFT is considering store divestments offered by Travis Perkins to address competition concerns in 20 local areas raised by its proposed acquisition of BSS Group in the UK.

The OFT's merger investigation found that the main overlap between the parties arises in their specialist plumbing and heating supply subsidiaries, Travis Perkins's City Plumbing Supplies and BSS's Plumbing Trade Supplies stores.

It concluded that the proposed acquisition will not give rise to competition concerns at a national level because the merged firm will continue to face strong competition from national and regional plumbing and heating specialist retailers with sizeable market shares.

The OFT assessed the level of competition that would remain in local areas where the parties have overlapping stores. To do this, it took account of the constraint provided by branches of other national specialists, the proximity of the parties' own stores, and the degree of competition provided in an area by independent plumbing and heating specialists and other suppliers of plumbing and heating products.

Following this local analysis, the OFT was able to conclude that competition concerns would not arise in the majority of local areas where Travis Perkins's City Plumbing Supplies and BSS's Plumbing Trade Supplies stores overlapped.

However, Travis Perkins has offered to sell the Plumbing Trade Supplies store or the overlapping City Plumbing Supplies stores in 20 areas across the UK where the OFT identified local competition concerns. The form of the proposed divestment undertakings in these 20 local areas will be the subject of public consultation prior to the OFT deciding whether to accept the undertakings in lieu of reference to the Competition Commission.

Amelia Fletcher, Senior Director of Mergers for the OFT, said:

'The OFT, as the first phase authority, applied a cautious approach to assessing the local impact of the proposed merger. We are considering Travis Perkins's offer of divestments in those local areas where the evidence before us, including the views of many local customers and competitors, did not dispel our concerns about the potential adverse impact of the merger on consumers.'

NOTES

1. Confidentiality - for reasons of confidentiality, the OFT cannot currently disclose which stores Travis Perkins has proposed to divest. Details on how the OFT identified the local areas requiring divestments will follow in the full text of the OFT's decision and in a public consultation on the proposed undertakings in lieu of reference to the Competition Commission. The full list of the actual stores to be divested will be published in the proposed undertakings in lieu on which the OFT consults in due course.

2. The reference test - the OFT has a duty to make a reference to the Competition Commission if it believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation, and the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.

3. Under the Enterprise Act 2002 a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million; or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced. 

4. Undertakings in lieu of reference - under section 73 of the Enterprise Act 2002 the OFT may, instead of making a reference to the Competition Commission, and for the purpose of remedying, mitigating or preventing the substantial lessening of competition concerned, or any adverse effect which may be expected to result from it, accept from such of the parties concerned as it considers appropriate undertakings to take such action as it considers appropriate. The OFT is required to consult publicly before accepting any such undertakings.

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