Affected market: Printing services
The OFT’s decision on reference under section 33(1) given on 25 April
2006. Full text of decision published 4 May 2006.
Dagsbrún hf (Dagsbrún) is an Icelandic investment company with
investments in a number of subsidiaries that are active in
telecommunications, media and entertainment in Iceland and the Faeroe
Islands and is active in the printing sector through its subsidiary
Isafoldarprentsmidja (Isafoldar). Isafoldar offers a full range of
printing services, including pre-press, printing and finishing.
Baugur Group hf (Baugur), Dagsbrún's largest shareholder (31.8 per
cent, see [Note 1]), is an Icelandic investment company that is
active in a number of countries including the UK. Its UK activities
comprise a number of investments in retail, property development and
Wyndeham Press group plc (Wyndeham) is a UK public limited company
active in the printing sector, predominantly in the UK (see [Note 2]).
It offers a full range of printing services, including
pre-press, printing, and finishing. Wyndeham’s UK turnover for the year
ending 31 March 2005 was £140.5 million.
On 24 March 2006, Dagsbrún, through its wholly owned subsidiary Daybreak
Acquisitions Limited, announced a cash offer of approximately £80.6
million to acquire the entire shareholdings of Wyndeham. The offer has
been recommended by Wyndeham’s Board of Directors.
On 28 March 2006 the parties notified the transaction to the OFT by way
of a Merger Notice. The 20 working day statutory deadline therefore
expires on 26 April 2006.
As a result of this transaction Dagsbrún and Wyndeham will cease to be
distinct. The UK turnover of Wyndeham exceeds £70 million, so the
turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act)
is satisfied. The OFT therefore believes that it is or may be the case
that arrangements are in progress or in contemplation which, if carried
into effect, will result in the creation of a relevant merger situation.
The parties overlap in two types of printing – web offset and sheetfed –
which are used to print magazines. Sheetfed printing is at the lower end
of magazine printing technology and is used for short print runs (less
than 30,000). Web offset is at the mid-high end of magazine printing
technology and is used for print runs up to 400,000. Web offset is the
dominant printing technology used for printing magazines in the UK.
Previously the European Commission has distinguished between different
types of printing by print run capacity, specifically rotogravure
printing was considered distinct from web offset printing as it could
reach higher capacities than offset machines and was generally more
efficient for high volume printing (see [Note 3]). Therefore,
the different capacities of web offset and sheetfed printing (discussed
above) may mean that it is appropriate to consider these types of
printing separately. Alternatively, the overlap could be considered in
respect of the end product – magazine printing.
However, it is not necessary to reach a definite conclusion on the
relevant product frame of reference, given that, whichever way the frame
of reference is defined, the merger does not give rise to competition
concerns (discussed further below).
Magazines can be a time sensitive product, and this may limit the
geographic scope over which customers can source their printing
requirements. Isafoldar only sell their products in Iceland. Isafoldar
submitted that the time sensitive nature of the product and costs of
transport from Iceland meant its products did not appeal to customers
outside Iceland and the Faeroe Islands. This was supported by customer
views, with competitors similarly viewing Iceland as a separate market.
Wyndeham, on the other hand, predominately sell their products in the
UK, making only a small number of sales in Europe (Germany) and the rest
of the world. The majority of UK customers indicated that they do not
currently purchase printing products outside of the UK due to the
associated costs, schedule implications, transport and manufacturing
resources. Similarly, UK competitors stated that they generally do not
consider that they face competition from abroad for their products. It
was also submitted that web offset magazine printing is generally UK
Based on this evidence, the OFT considers that the appropriate
geographic frame of reference may be UK wide. Furthermore, given the
location of Iceland in relation to the UK and the rest of Europe and the
limited export of printing products to and from Iceland, even if the
geographic frame of reference was expanded to that of Europe, Iceland
may still be considered separate from the rest of Europe.
Nonetheless, a cautious approach has been taken and the impact of the
merger has been examined both on a European wide (including Iceland) and
a UK wide basis.
Isafoldar is not active in the UK. On a European wide (including
Iceland) basis, the parties combined shares of supply are less than five
percent regardless of the product frame(s) of reference chosen and
sufficient competitive constraints exist post-merger. Furthermore, both
customers and competitors indicated that Isafolder and Wyndeham do not
currently compete with one another, primarily due to the geographic
distance between the two. As a result, no competition concerns are
considered to arise at either the UK or European level.
The parties submitted that vertical links may exist between Wyndeham and
Baugur’s retail investments. Wyndeham produces catalogues and Baugur's
retail investments in the UK purchase catalogues for marketing their
products and services.
These vertical links are not considered to lead to any substantial
lessening of competition in the supply of printing services for
catalogues because Wyndeham’s share of supply of printing services for
catalogues is less than 15 per cent. Similarly, Baugur’s share of sales
for the purchase of catalogue printing services in the UK is
considerably less than 15 per cent. Therefore, sufficient competitive
constraints exist post-merger.
THIRD PARTY VIEWS
Third parties did not raise any competition concerns regarding the
merger. In general they indicated that Iceland was a separate market and
Isafoldar did not currently provide a competitive constraint on
The parties are both active in the supply of web offset and sheetfed
magazine printing services for printing magazines. At a UK level, there
is no overlap between the parties’ activities as Isafoldar is not
active outside of Iceland and the Faeroe Islands. At a European level,
the parties’ shares of supply are below five percent irrespective of
the product frame of reference chosen and sufficient competitive
constraints exist post-merger. In addition, third parties have indicated
that the parties do not currently compete with one another due to the
geographic distance between the two. The merger may also give rise to
vertical links between Wyndeham, a catalogue printer, and Bauger's
retail investments which purchase catalogues. However, this is not
considered to lead to any substantial lessening of competition given
both Wyndeham’s sales and Bauger’s purchases of catalogues are
relatively small and sufficient competitive constraints remain
Consequently, the OFT does not believe that it is or may be the case
that the merger may be expected to result in a substantial lessening of
competition within a market or markets in the United Kingdom.
This merger will therefore not be referred to the Competition Commission
under section 33(1) of the Act.
- As at 24 March 2006, this shareholding is partly held through an
intermediate company in which Bauger has a significant shareholding.
- In addition to generating the majority of its turnover in the UK,
Wyndeham also generated a very small proportion of its turnover in Germany.
- COMP/M.3178 – Bertelsmann/Springer/JV.