CMA requires Electro Rent to sell its UK arm
The CMA has decided that Electro Rent should sell its UK division to preserve competition following its merger with Microlease.
Electro Rent, a global corporation with its headquarters in the US, acquired Microlease in February 2017. Both companies were close competitors in the rental of specialist equipment that tests and measures the performance of electronic devices used in industries such as telecommunications, defence, utilities and information technology.
The completed merger of the two businesses was referred to a group of independent panel members at the Competition and Markets Authority (CMA) for an in-depth phase 2 investigation in October last year, after an initial phase 1 investigation identified competition concerns.
The group has today published its final decision, finding that Electro Rent’s purchase of Microlease is likely to lead to a worse deal for renters of testing and measurement equipment. They found that Electro Rent, though significantly smaller than Microlease in the UK, was the only other rental company operating in the country to have the resources and stock to compete effectively with Microlease.
The group has therefore concluded that it is likely the merger will lead to a substantial lessening of competition in the sector, and a worse deal for UK customers. It has decided that the merged business will have to sell Electro Rent UK to a new owner, to be approved by the CMA, in order to preserve competition.
Simon Polito, Inquiry Chair, said:
The merged business would be the only suitable UK supplier for a large number of customers. It is unlikely that the new company would be prevented from using its position to increase prices or reduce its quality of service to customers by new entrants or expansion of established companies.
Having looked at this in detail and sought views from a range of market participants, we therefore consider that Electro Rent needs to sell its pre-merger UK business to preserve competition.
We have set strict purchaser criteria to make sure the buyer will be able to operate the business to compete effectively before the CMA approves the sale.
Full information on the Electro Rent / Microlease merger inquiry can be found on the case page.
Notes for editors
- The business that is to be sold, Electro Rent UK, is the former UK operations of Electro Rent. The merged company will continue to operate in the UK with the former Microlease business.
- Electro Rent and Microlease are both global corporations each with worldwide annual revenues of around £120 million. The head office of Electro Rent is in the US, and that of Microlease is in the UK.
- Electro Rent acquired Microlease in January 2017. In February 2017 the CMA called in the merger for a phase 1 review. Electro Rent initially offered to sell its UK business to a competitor, in order to overcome the CMA’s concerns. However, the purchaser withdrew from the deal, and the CMA therefore referred the case for a phase 2 investigation on 19 October 2017.
- On 5 February 2018 the group published its provisional findings and notice of possible remedies and invited views. The group considered responses to its provisional findings and its remedies notice.
- All the CMA’s functions in phase 2 merger inquiries are performed by inquiry groups chosen from the CMA’s panel members. The appointed inquiry group are the decision-makers on phase 2 inquiries.
- The CMA’s panel members come from a variety of backgrounds, including economics, law, accountancy and/or business; the membership of an inquiry group usually reflects a mix of expertise and experience.
- The members of this inquiry group are Simon Polito (Inquiry Chair), Jeremy Newman, Jayne Scott and David Thomas.
- Media enquiries to the CMA should be directed to press@cma.gsi.gov.uk or 020 3738 6460.