The Australian Competition and Consumer Commission today announced that it does not propose to intervene in Pact Group Pty Ltd’s proposed acquisition of Viscount Plastics Pty Ltd.
After an extensive investigation, including the publication of a Statement of Issues on 24 November 2011, the ACCC formed the view that the proposed acquisition would not result in a substantial lessening of competition in any market.
The proposed acquisition was considered in the context of national markets for the manufacture and supply of plastic pails, plastic building cartridges and materials handling products, as well as a market for the manufacture and supply of PET containers in Western Australia.
“The ACCC formed the view that the merged firm is likely to be constrained in the market for plastic pails by alternate domestic suppliers, many of whom could readily expand by increasing their production capacity to defeat an attempted price increase by the merged firm,” ACCC chairman Rod Sims said.
Post acquisition, National Can Industries Limited (NCI) will be the second largest supplier of plastic pails. The ACCC noted that Bennamon Pty Ltd (a related entity of Pact) holds a 19.99% shareholding in NCI. The ACCC’s review considered how this shareholding may affect the merged firm’s incentive to compete effectively against NCI (given that it would enjoy 19.99% of NCI’s profits). However, the ACCC noted that NCI recently announced to the ASX that Bennamon has entered into a share purchase agreement for the sale of Bennamon’s shares in NCI.
In relation to plastic building cartridges the ACCC considered that customers have the ability to sponsor manufacturers of other injection moulded products to commence supplying building cartridges.
“Market inquiries also indicated that customers of plastic building cartridges are able to credibly threaten to switch to overseas manufacturers,” Mr Sims said.
The ACCC’s consideration of PET containers was limited to Western Australia because this is the extent of Viscount’s PET operations. While Pact does not presently manufacture PET containers within Western Australia, Visy Industries Australia Pty Ltd does, and the ACCC had regard to the relationships and links between Pact and Visy in considering the likely state of competition if the proposed acquisition proceeded.
In making its decision on PET containers, the ACCC considered the limited product overlap between Viscount and Visy, and the potential for customers to manufacture their own PET containers.
“In both this review, and the ACCC’s recent review of Visy’s proposed acquisition of HP’s PET and plastics assets, market inquiries have indicated that a range of market participants are currently self-manufacturing their own PET containers,” Mr Sims said.