The Australian Competition and Consumer Commission is unlikely to intervene in the proposed merger of Taubmans and Bristol Paints.
"The proposed merger of Taubmans and Bristol may prove beneficial for competition in the paint industry," ACCC Chairman, Professor Allan Fels, said today. "Paint users may well benefit from this merger through vigorous competition between three major paint manufacturers.
"The ACCC decided it is unlikely to intervene based on the information it collected during the aborted acquisition by Wattyl of Taubmans in 1996. But we reserve our usual rights in making inquiries now the merger is public."
In May 1996, the ACCC refused to authorise Wattyl's proposed acquisition of Taubmans as it would be anti-competitive.
The ACCC was concerned that given the structure of the industry a reduction in the number of large paint manufacturers to two would probably result in price increases.
In August 1996, Barlow Limited acquired Taubmans through a wholly owned subsidiary. Barlow Limited is a South African industrial company.
"The proposed Taubmans/Bristol merger should create a third major player in the market to compete with Dulux and Wattyl. Thus, the ACCC believes the proposed merger of Taubmans and Bristol may well be pro-competitive." Dulux and Wattyl are the largest manufacturers of paint in Australia. Dulux and Wattyl have approximately 40 per cent and 28 per cent of the market for architectural and decorative paint in Australia, respectively. Taubmans and Bristol have market shares of approximately 14 per cent and 8 per cent, respectively.
"Dulux and Wattyl enjoy a competitive advantage over both Taubmans and Bristol with a national presence with significant market shares in every Australian State. Taubmans is relatively weak in Victoria/Tasmania and South Australia/Northern Territory. Bristol is really only a significant player in Victoria/Tasmania.
"The merged firm will be the third largest paint supplier in all States with the exception of Queensland where it will be second behind Dulux. "The parties argue that by itself, Bristol would not have the necessary market strength to seriously challenge the larger paint manufacturers. Now, combined with Taubmans, the parties say the paint market has a third manufacturer with both the incentive and the ability to challenge Dulux and Wattyl."
Dulux and Wattyl each have strong brand names - the former, Dulux, Berger, British Paints and Cabots and the latter, Solver, Pascol and Wattyl. The merged firm will have two strong brands, Taubmans and Bristol, with which to compete with the market leaders.
Further, Bristol's plants are somewhat older than Taubmans' plant which is one of the most efficient in Australia. Although the capital costs of constructing a paint manufacturing plant are not high, the merged firm could reduce total paint manufacturing costs by rationalising production.
Bristol distributes paint from its manufacturing plants in Victoria and Queensland. Taubmans has a national distribution system delivering from a NSW manufacturing site. The parties say the merger would enhance the distribution capacities of the merged firm.
"The small paint manufacturers, such as Bristol, generally follow the prices of the major paint manufacturers," Professor Fels said. "I expect the merged firm will have the motive to compete because it will be the smallest of the three major paint manufacturers, with the incentive to grow its market share by challenging Dulux and Wattyl.
"The ACCC believes that the merged firm should compete more effectively with Dulux and Wattyl as a third force than would be possible in the absence of the merger.
"Taubmans and Bristol approached the ACCC recently on a confidential basis, for the ACCC's view about the proposed merger."
Further information Professor Allan Fels, Chairman, pager (016) 373 536
"The proposed merger of Taubmans and Bristol may prove beneficial for competition in the paint industry," ACCC Chairman, Professor Allan Fels, said today. "Paint users may well benefit from this merger through vigorous competition between three major paint manufacturers.
"The ACCC decided it is unlikely to intervene based on the information it collected during the aborted acquisition by Wattyl of Taubmans in 1996. But we reserve our usual rights in making inquiries now the merger is public."
In May 1996, the ACCC refused to authorise Wattyl's proposed acquisition of Taubmans as it would be anti-competitive.
The ACCC was concerned that given the structure of the industry a reduction in the number of large paint manufacturers to two would probably result in price increases.
In August 1996, Barlow Limited acquired Taubmans through a wholly owned subsidiary. Barlow Limited is a South African industrial company.
"The proposed Taubmans/Bristol merger should create a third major player in the market to compete with Dulux and Wattyl. Thus, the ACCC believes the proposed merger of Taubmans and Bristol may well be pro-competitive." Dulux and Wattyl are the largest manufacturers of paint in Australia. Dulux and Wattyl have approximately 40 per cent and 28 per cent of the market for architectural and decorative paint in Australia, respectively. Taubmans and Bristol have market shares of approximately 14 per cent and 8 per cent, respectively.
"Dulux and Wattyl enjoy a competitive advantage over both Taubmans and Bristol with a national presence with significant market shares in every Australian State. Taubmans is relatively weak in Victoria/Tasmania and South Australia/Northern Territory. Bristol is really only a significant player in Victoria/Tasmania.
"The merged firm will be the third largest paint supplier in all States with the exception of Queensland where it will be second behind Dulux. "The parties argue that by itself, Bristol would not have the necessary market strength to seriously challenge the larger paint manufacturers. Now, combined with Taubmans, the parties say the paint market has a third manufacturer with both the incentive and the ability to challenge Dulux and Wattyl."
Dulux and Wattyl each have strong brand names - the former, Dulux, Berger, British Paints and Cabots and the latter, Solver, Pascol and Wattyl. The merged firm will have two strong brands, Taubmans and Bristol, with which to compete with the market leaders.
Further, Bristol's plants are somewhat older than Taubmans' plant which is one of the most efficient in Australia. Although the capital costs of constructing a paint manufacturing plant are not high, the merged firm could reduce total paint manufacturing costs by rationalising production.
Bristol distributes paint from its manufacturing plants in Victoria and Queensland. Taubmans has a national distribution system delivering from a NSW manufacturing site. The parties say the merger would enhance the distribution capacities of the merged firm.
"The small paint manufacturers, such as Bristol, generally follow the prices of the major paint manufacturers," Professor Fels said. "I expect the merged firm will have the motive to compete because it will be the smallest of the three major paint manufacturers, with the incentive to grow its market share by challenging Dulux and Wattyl.
"The ACCC believes that the merged firm should compete more effectively with Dulux and Wattyl as a third force than would be possible in the absence of the merger.
"Taubmans and Bristol approached the ACCC recently on a confidential basis, for the ACCC's view about the proposed merger."
Further information Professor Allan Fels, Chairman, pager (016) 373 536