Anticipated acquisition by Gamestec Leisure Limited of Rank Leisure Machine Services Limited

Affected market: Gaming and amusement machines

No. ME/1521/03

Please note that the full text of the decision can be downloaded by using the link on the right . What follows are extracts regarding the parties, the transaction, jurisdiction, assessment, and decision.

The OFT's decision on reference under section 33 given on 5 January 2004

PARTIES

Gamestec, a subsidiary of Kunick Limited, is active in the operation and rental of amusement and gaming machines.

Kunick Limited also holds a 40 per cent interest in each of Bell-Fruit Games Limited and Mazooma Games Limited, which design and manufacture gaming machines.

Rank Leisure Machine Services Limited (RLMS) is a wholly owned subsidiary of the Rank Group plc and is primarily active in the operation and rental of amusement and gaming machines.  RLMS is also active in the wholesale distribution in the UK of amusement and gaming machines manufactured by other companies.  RSAL, a subsidiary of RLMS, operates a seasonal arcade business at various locations in the UK.  Certain assets of Pleasurama Property Investments Ltd (also a wholly owned subsidiary of the Rank Group) are also included in the transaction.

TRANSACTION

The acquisition is an asset sale under which Gamestec will acquire the assets of RLMS and RSAL (and assets currently held by Pleasurama Property Investments Ltd).

The parties submitted a merger notice on 5 November 2003.  On 10 December 2003 the merger notice was withdrawn by the parties and the OFT continued to consider the merger under the procedure for informal submissions.  The adminstrative 40-working day timetable expires on 5 January 2003.

JURISDICTION

As a result of this transaction Gamestec and RLMS will cease to be distinct.  The parties overlap in the supply of gaming and amusement machines and the share of supply test in section 23 of the Enterprise Act 2002 is met when segmented by type of customer.  The transaction would lead to a combined share of supply of 25 per cent or above for motorway services ([35-45] per cent, increment of [less than 5 per cent]  (see note 1)) and Licensed Betting Offices, excluding Fixed Odd Betting Terminals (FOBTs) ([25–30] per cent, increment of [less than 5 per cent] (see note 1)).  Moreover, it would appear likely that if the gaming and amusement machine sector were segmented by national and regional customers, the proposed transaction would give rise to a share of supply of greater than 25 per cent with respect to national contracts.  The OFT therefore believes that it is or may be the case that a relevant merger situation will be created.

ASSESSMENT

The parties overlap in the operation and rental of amusement and gaming machines in the UK.  The post-merger HHI is estimated at between 540 and 606, representing an increment of 102.  As a result of the merger the number of operators currently capable of providing national coverage will reduce from five to four.

Barriers to entry/expansion appear to be low, and the formation of the IOA demonstrates the ability for regional players to form a consortium to bid for national contracts.  National customers also appear able to use a number of regional suppliers.  Buyer power amongst the large national customers also appears to be reasonably strong.

Therefore, the OFT does not therefore believe that there is a significant prospect that the merger would substantially lessen competition.

We have gone on to consider whether there exists a credible alternative view.  In particular, in view of concerns put to us by some customers, we have considered whether regional players are not able to compete effectively with national players to serve the needs of national customers.  The result of our assessment is that there are not sufficient grounds to give credibility to a view that the merger might substantially lessen competition.  Therefore, as well as not believing that there is a significant prospect that the merger would substantially lessen competition, the OFT does not believe that there is a credible alternative view that the merger might substantially lessen competition.

DECISION

This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.

NOTES

1.  Actual figures replaced by a range at the request of the parties for reasons of commercial confidentiality.

2. Text or figure(s) deleted at the request of the parties for reasons of confidentiality.

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