Competition concerns over construction products merger

The £37.5m disposal of Sheffield-based building materials specialist SIG’s Building Solutions Division has been referred to the UK Competition & Markets Authority. (CMA)

The CMA’s director today said the body is concerned the deal could harm competition.

As previously reported, on 7 October 2019, SIG announced the disposal of Building Solutions (National) to Kingspan Group, a building envelope solutions company based in Ireland. The deal was conditional upon the approval of the CMA.

The CMA has now confirmed that it has referred the disposal for a phase two investigation.

Kingspan is a major UK provider of standard foam sandwich panels, which are commonly used as insulated cladding on commercial and industrial buildings such as large waste facilities.

It already owns a number of businesses that supply these products in the UK, including Joris Ide.

Building Solutions also sells a range of insulation and specialist construction products through a variety of businesses, including Steadmans, Trimform, Advanced Cladding and United Roofing Products.

The CMA explains: “Kingspan and Building Solutions are two of only three key suppliers of standard foam sandwich panels in the UK and would only face serious competition from one other UK-based supplier – Tata Steel – after the deal.

“Competition from suppliers of products imported from outside the UK and suppliers of other products sometimes used as insulated cladding is also very limited.

“The CMA phase one investigation therefore found the deal could leave the merging companies’ customers, typically building contractors, with few alternative suppliers to choose from.”

Colin Raftery, CMA senior director, said: “Foam sandwich panels are widely used in non-residential buildings across the UK, such as supermarket distribution centres, hospitals and police stations.

“Sales of foam sandwich panels in the UK amounted to about £200m last year, so they account for an important part of the construction costs faced by businesses and public bodies.

“Kingspan is by far the largest player in this market and this deal would involve it buying up one of its only two meaningful competitors.

“So, we’re concerned the deal could damage competition, resulting in higher prices or lower quality products.”

The CMA adds it is conscious the construction sector is expected to be heavily impacted by the Coronavirus (COVID-19) pandemic, and will see a considerable slowdown of activity in the near term.

But it notes that despite these circumstances, Kingspan and Building Solutions are expected to remain important competitors in the longer-term.

Kingspan and Building Solutions must now address the CMA’s concerns within five working days. If they are unable to do so, the deal will be referred for an in-depth phase two investigation.