By now you’d think even the slowest thinking Australian businessman, lawyer and media mate would be getting the message that the ACCC is going to knock back any deal that could involve a lessening of competition.
The failure of the $14 billion NAB bid for French-owned funds manager AXA Asia Pacific was the latest in a string of decisions that is redefining the level of acceptable competition in the shrinking Australian market.
It’s not just only broad-brush, industry-changing mergers that have been rejected, such as the Caltex purchase of Mobil’s service stations, but it’s on a smaller, or micro-market level, as ACCC chairman, Graeme Samuel said on ABC radio today:
“NAB’s Navigator platform was highly innovative, while AXA’s North platform was emerging as a significant rival.
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“This is technological innovation in the area of funds management.
“We were concerned that, if NAB were to take over AXA, then that drive, that incentive for competition and innovation would be removed and that would have substantially lessened competition in that market.”
This decision and a string of similar ones from the commission since late last year, has put every Australian company on notice that if they operate in an industry doing deals that reduce or limit competition, even at small micro-market levels, will be very, very tough.
Some of the deal whisperers in the media haven’t got the message, judging by the confidence expressed in The Australian yesterday that the NAB and AMP bids for AXA Asia Asia Pacific would be approved, a view that seemed optimistic after the ACCC raised objections to the NAB’s offer in its issues paper back in February.
As it was the NAB was rejected and the AMP given the green light, as it seems with the commission’s issues paper two months ago. That was followed up by this decision late yesterday.
“The ACCC found that a merger between NAB and AXA would result in a substantial lessening of competition in the market for retail investment platforms for investors with complex investment needs. However, the ACCC found that an independent AXA or a merger between AMP and AXA would not have this effect.”
It came just over a week after the commission rejected the purchase of Goodman Fielder’s edible oils business by US grain and oils giant Cargill.
Goodman Fielder is currently the largest refiner of edible fats and oils in Australia, supplying a wide range of products, including margarines, oils blends, bakery fats and liquid oils. Cargill Australia is also a refiner of edible fats and oils and is the largest supplier of crude oils to Australian edible fats and oils refiners.
“The ACCC investigation found that the proposed acquisition of the Goodman Fielder assets by Cargill would lead to a significant concentration of refining assets in Australia and remove one of only a small number of competing refiners that offer a wide range of fats and oils products,” Samuel said today.
Two weeks before that the commission rejected a takeover in the share registry industry that would have seen the second and third largest competitors merge.
The ACCC today announced that it intends to oppose the proposed acquisition of Newreg Pty Ltd, including Registries Limited, by Link Market Services Limited. The ACCC concluded that the acquisition of Registries by Link would be likely to substantially lessen competition in the national market for securities registration and related services to listed companies and other entities with similar requirements, leading to higher prices and reduced quality of service that shareholders would ultimately bear,” Samuel said today.
In mid-December the ACC rejected the takeover of Breville Group by GUD Holdings (Sunbeam), saying :
“GUD Holdings supplies the Sunbeam and Emjoi ranges of small electrical appliance products in Australia, while Breville Group supplies the Breville, Kambrook, Ronson and Philips ranges of products.
“The ACCC’s investigation found that the proposed acquisition of Breville Group by GUD Holdings would likely lead to a substantial lessening of competition in relation to the wholesale supply of a number of categories of small electrical appliances. In forming this view, the ACCC made inquiries of a large number of stakeholders, many of whom raised concerns regarding the proposed acquisition.”
The wording and reasonings are all similar. As Samuel said the commission won’t necessarily block further mergers in the financial sector, but to get approval they will have to show they do not reduce competition at all levels.
As for the NAB bid for AXA Asia, the bank can sell its Navigator platform if it wants to win the green light.
The willingness of the NAB to do this will tell us two things: if it sells Navigator, then it really wants AXA Asia, if it decides to keep it and loses AXA Asia, then you’d have to ask why did it bid in the first place, except as a means of expanding market share and reducing competition.