Yorkshire deal referred to Competition Commission

THE OFFICE of Fair Trading (OFT) has referred a deal which saw family-owned Yorkshire chemicals firm A H Marks sold to Australian group Nufarm for £75m to the Competition Commission.

Bradford-based A H Marks is the UK’s largest privately-owned chemical manufacturer and was founded in 1877.

The £65m-turnover company which employs 330 people was acquired by Nufarm, which is Australia’s biggest supplier of farm chemicals, in March.

In referring the deal to the Competition Commission, the OFT claimed it exposed customers to “near monopoly” prices and was one of a series of mergers not notified to the OFT.

Both firms supply customers with chemicals used to make herbicides, which in turn are used by farmers to protect against weeds.

The OFT said other herbicides used by UK grassland farmers were “generally far more expensive or target a different spectrum of weeds” and it was not convinced that enough farmers would switch to them if there was an increase in the price of herbicides based on Nufarm’s phenoxy-based chemicals.

Other reasons why the OFT has referred to the Competition Commission were:

– A number of UK herbicide formulators and distributors – who buy chemicals directly from the parties and supply the herbicides to farmers – were themselves of the view that Nufarm could raise prices post-merger.

– There is just one other existing supplier of these products in the UK, Dow AgroSciences, but the OFT was not convinced that competition from Dow AgroSciences alone would prevent Nufarm from raising prices.

– While it was plausible that other foreign suppliers could enter the UK post-merger, the evidence was too weak to give comfort that new entry would be likely, timely, and on the scale required to replace the competition lost by the merger.
 
The OFT accepted that the overall value of the markets affected by the deals would be less than £10m but it said it felt a Competition Commission investigation was warranted.

Simon Pritchard, OFT’s senior director of mergers, said: “Nufarm was perfectly entitled to take the risk of completing this acquisition and integrating the UK businesses. For the OFT, however, protecting UK customers and consumers comes first, and while we take no satisfaction from the inevitable disruption, we will not hesitate to intervene whenever necessary.

“While the markets here are not large, the merger’s impact is significant, with customers potentially exposed to near-monopoly prices, and the deterrent effect on future mergers that could result in monopolies is also an important consideration for us. As such, the Competition Commission has a valuable job to do in giving this merger thorough scrutiny.”

A H Marks has produced chemicals at its site in Wyke, Bradford, since 1877 when it began making dyes for the local textile industry.

It now produces chemicals used by manufacturers of crop protections, petrochemicals and biocides. Nufarm said on completion of the deal that it planned to invest in increasing production at the Wyke site and develop new products.