Competition watchdog threatens Hill & Smith with investigation

THE proposed £10.5m acquisition by Shirley-based Hill & Smith of a Telford galvanising firm is to be referred to an in-depth investigation by the UK competition watchdog unless it receives assurances the galvanising industry in the West Midlands will not be compromised.

Hill & Smith announced in April that its subsidiary, Joseph Ash, intended to acquire W Corbett in order to improve its offering in the galvanising sector.

However, it was warned at the time that the approach could pique the interest of the Competition and Markets Authority due to the impact the deal could have on the supply of galvanising services in the West Midlands.

In a statement, the CMA said it had found that the “proposed acquisition may be expected to result in a substantial lessening of competition in the supply of galvanising services in the West Midlands region around the Corbett galvanising plant in Telford. This represents an important regional market for these services”.

During its investigation, the CMA said it had received a number of concerns from customers that the proposed acquisition would lessen competition and lead to higher prices. Other evidence gathered by the CMA indicated that the companies compete closely and are two of the three main galvanisers in the area served by W Corbett.

It added that the competition provided by other galvanisers in the area may not be sufficient to meet the challenge posed by the merged business.

Andrea Coscelli, CMA Executive Director of Markets and Mergers and decision-maker in this case, said: “A number of important manufacturers in the UK rely on competitively priced inputs such as this for the production of their goods. When competition is reduced and results in higher prices, the ability of these manufacturers to compete nationally and internationally can suffer – and can in turn lead to increased prices for their own customers.

“We are concerned to preserve the existing level of competition in the West Midlands region where Joseph Ash and W Corbett currently compete. W Corbett is a large independent player and has provided a strong competitive constraint to its established rivals for many years.

“Unless Joseph Ash offers undertakings that resolve the competition concerns, this transaction will face an in-depth investigation to assess whether this merger might result in higher prices for manufacturers using these services.”

In its own statement, Hill & Smith said it was carefully considering the CMA’s announcement and would make a further announcement in due course.

Joseph Ash has until July 2, 2015 to offer assurances to the CMA. If no undertakings are offered or accepted, then the CMA will by July 9 refer the merger for a phase 2 investigation.