Affected market: Care Homes
No. ME/1544/05
Please note that the full text of the decision can be downloaded from 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 22 given on 5 april 2005. Full text of decision published 13 April 2005.
PARTIES
The Blackstone Group (Blackstone) is a private merchant banking firm based in New York. Blackstone's private equity and real estate funds hold investments in a variety of companies and properties. In September 2004, Blackstone entered the UK care home sector when it acquired from West Private Equity, Southern Cross, a business which operates 159 care homes across the UK (see note 1).
NHP Plc (NHP) is a UK-listed public company active in the care home sector. It holds a portfolio of approximately 358 homes which it leases out to private operating companies, including its affiliate, Highfield Care Ltd (Highfield) and Southern Cross. Highfield operates 187 care homes for the elderly across the UK. NHP's UK turnover to the financial year ending 30 September 2003 was €254m (approximately £177m).
TRANSACTION
Blackstone's proposal to acquire NHP met the threshold for investigation under the EC Merger Regulation (ECMR) and was notified to the EC Commission on 9 December 2004. The OFT subsequently requested referral of this case in accordance with Article 9(2)(b) of the ECMR as the OFT could not rule out potential competition concerns in some local areas of the UK for the provision of care or nursing homes for the elderly.
The EC Commission granted referral of this case on 1 February 2005 (see note 2). The parties have since completed the merger, on 9 February 2005. In accordance with Art. 9(6) ECMR, the relevant statutory deadline expires 14 April 2005. The OFT's administrative deadline for dealing with this case is 7 April 2005.
JURISDICTION
As a result of this transaction Blackstone and NHP have ceased to be distinct. The UK turnover of NHP exceeds £70 million, so the turnover test in section 23(1)(b) of the Enterprise Act 2002 is satisfied. A relevant merger situation has therefore been created.
ASSESSMENT
This inquiry focused on the parties' overlaps in the local supply of care homes. While on the narrowest possible frame of reference the parties have a high combined share of supply in a number of areas, the OFT has found that in the areas with the highest combined share (Arbroath and Nottingham) specific constraints, in the form of pricing restrictions and overcapacity exist in the respective areas. In addition, the OFT considers that overall the care homes sector in the UK is subject to sufficient constraints from countervailing buyer power and low barriers to entry.
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.
DECISION
This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.
NOTES
1. The completed transaction was notified in the UK under the Enterprise Act on 4 January 2005 and was cleared on the basis of there being no overlaps between the parties.
2. The EC Commission's decision is available from the European Union website.
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