OFT closed case: Completed acquisition by Volker Wessels UK Limited of Fitzpatrick plc.
Affected market: Construction
OFT's decision on reference under section 22 given on 21 September 2004.
Volker Wessels UK Limited (Volker Wessels) is a subsidiary of the Dutch company Royal Volker Wessels Stevin NV and involved in the design, development, realisation and management of building projects. It is active in road maintenance through its subsidiary John Crowley.
Fitzpatrick Plc (Fitzpatrick) undertakes projects and performs services in the construction industry, including civil engineering, building, highway services and facility maintenance. The UK turnover of Fitzpatrick for the year ended 31 December 2003 was £224.8 million.
On 17 May 2004 Volker Wessels acquired all issued shares in Fitzpatrick's parent company Pearlpeace Limited. The extended statutory deadline is 29 September 2004 and the administrative timetable expires on 6 October 2004.
As a result of this transaction Volker Wessels and Fitzpatrick have ceased to be distinct. The UK turnover of Fitzpatrick 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 a relevant merger situation has been created.
Volker Wessels submitted that the parties only overlap in the supply of road maintenance, which has been confirmed by third parties. Volker Wessels is active in this field through its subsidiary John Crowley. Road maintenance incorporates all elements of carriageway construction including road and footway.
The parties and third party responses indicate that the relevant frame of reference for this assessment is considered as road maintenance.
Volker Wessels submitted that suppliers of road maintenance compete both on a local and national level. Tenders may be on a small scale e.g. a single London borough or large scale, e.g. a county. There appear to be no constraints on contractors to bid in a region other than where they are located. However, as John Crowley's geographic area is limited to the South East of England the local overlap will also be considered for the purpose of this assessment. The relevant frames of reference are therefore confined to the local and national supply of road maintenance.
On the basis of the data estimated by the parties, post-merger, the parties combined share of supply for the UK supply of road maintenance is 3.33 per cent (increment 1.05 per cent).
Volker Wessels submits that it is unable to provide competitors' shares of supply but maintains that they are likely to exceed those of the merging parties. Responses from third parties agree that there is a wide choice of suppliers available. The parties also submitted, and this was confirmed by third parties, that pre-merger they bid for different types of contracts.
For completeness, local issues are considered as John Crowley's geographic area is limited to the South East of England where Fitzpatrick is also active. John Crowley estimates its supply of road maintenance in the South East to amount to 2.58 per cent of the South East supply and Fitzpatrick's to 2.4 per cent. On the basis of these estimates, post-merger, the parties' combined share of supply for the South Eastern region of road maintenance is 4.98 per cent (increment 2.4 per cent). A large number of alternative suppliers are available and no third parties raised any concerns.
THIRD PARTY VIEWS
Third parties had no concerns and all submitted that there are numerous suppliers active in road maintenance on a national level and in the South-East.
The transaction qualifies on the turnover test pursuant to section 23(1) (b) of the Act. The relevant frames of reference are considered to be the local and national supply of road maintenance.
Locally, post-merger, the combined share of supply for the South Eastern region of road maintenance is 4.98 per cent (increment 2.4 per cent). Furthermore, nationally for the UK supply of road maintenance the parties combined share of supply amounts to 3.33 per cent (increment 1.05 per cent). No third parties raised any competition concerns and there are numerous additional suppliers active in this sector on both the local and national level.
Consequently, the OFT does not believe that it is or may be the case that the merger has resulted or 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.