Competition to stay robust - Fletcher

Competition to stay robust - Fletcher
04 July 2005

Fletcher Building’s proposed purchase of assets from Auckland company W. Stevenson & Sons would not reduce competition in the ready-mix concrete building products sector, says an independent appraisal report.  Stephen Gale, a competition policy expert at strategic government and business advisers Castalia, prepared a paper that was submitted to the Commerce Commission.

Fletcher Concrete and Infrastructure last month sought clearance to buy Stevenson’s ready-mixed concrete, masonry, terrazzo, precast products and building retail businesses. Not all of Stevenson’s assets are being sold and a Stevenson’s spokeswoman said last month Fletcher was one of many potential bidders.

Gale’s paper accompanied Fletcher’s written submission to the commission and said the market for the supply of aggregate was already competitive and would not be less so if Fletcher were allowed to buy the Stevenson’s business.  Nor would the acquisition substantially lessen competition in the readymixed concrete sector, Gale said. He cited the commission’s 2003 clearance of cement, aggregates, ready-mix concrete and lime business Holcim NZ to buy rival Atlas Resources. He noted that Fletcher owned Winstone Aggregates, Golden Bay Cement and the ready-mix and concrete masonry business Firth.

Mark Binns, director of Fletcher Concrete and Infrastructure, provided the commission with two versions of his application - one public and one confidential. The secret version disclosed what sector shares of Fletcher and its competitors would be before and after the Stevenson’s purchase and how much Fletcher would offer for the Stevenson’s assets.

He provided a divestment undertaking, saying Fletcher would sell some businesses if the commission required it to address concerns about monopolies in Northland, Auckland and Canterbury. These would include the Auckland concrete masonry business of either Fletcher Concrete or Stevenson’s and the Christchurch concrete masonry business of Stevenson’s.

Fletcher would also sell the Stevenson’s Canterbury supply yards to address concerns about retail monopolies. He said Fletcher’s and Stevenson’s businesses overlapped in markets including the manufacture and supply of readymixed concrete and precast concrete products in Auckland and concrete masonry products in the Northland, Auckland and Canterbury regions.

“Technically, there is also an overlap in the retail supply of concrete-based building materials and supplies and other outdoor landscaping materials and supplies in the sense that these products are sold at retail by both Fletcher Distribution and Stevenson’s.’’

He cited other businesses such as Bridgeman Concrete which would provide a strong competitive constraint’. Holcim, Atlas, Allied Concrete, Counties Ready Mix, Wilson Ready Mix Concrete and Wharehine were others competing in the sector in Auckland, he submitted.

The commission is due to deliver its decision this week.

Published under Cement News