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Anticipated acquisition by Killarney Manufacturing Group Ltd of Balmoral Group Limited's GRP tank manufacturing business

Affected market: Glass-reinforced plastic tanks

No. ME/3191/07

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, third party views, assessment, undertakings in lieu of reference and decision.

The OFT's decision on reference under section 33(1) given on 25 October 2007. Full text of decision published 6 November 2007.

Please note that square brackets indicate text or figures which have been deleted or replaced with a range at the request of the parties for reasons of commercial confidentiality.


Silverline Tanks Limited (Silverline) is a wholly owned subsidiary of Killarney Manufacturing Group Limited (Killarney), a holding company for a group of companies which undertake a range of activities including the supply of glass fibre reinforced plastic tanks (GRP tanks). Killarney has three separate companies trading in GRP tanks: Dewey Waters Limited; Nicholson Plastics Limited; and AC Plastic Industries Limited. Killarney is based in Ireland but has GRP tank operations at various locations in the UK.

Balmoral Tanks (Balmoral), a part of Balmoral Group Limited, is the GRP water tank business being acquired. Balmoral Group Limited is a part of Balmoral Group Holdings Limited which manufactures and supplies GRP water tanks in the UK.


On 25 July 2007 Silverline agreed to purchase the GRP tank business, related fixed assets and goodwill of Balmoral. Balmoral staff will also be transferred as a part of the acquisition.


As a result of this transaction Silverline, an enterprise carried on by or under the control of Killarney, will cease to be distinct from Balmoral Tanks, the GRP water tanks business carried on by or under the control of Balmoral Group Limited. The parties overlap in the supply of GRP water tanks and the share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met.

The Office of Fair Trading (OFT) therefore believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation.


Three large customers were concerned. One told the OFT that the parties are the only manufacturers of hot-pressed GRP tank panels in the UK, and claimed switching to foreign suppliers would increase costs and switching to producers of hand-lay up panels would mean poorer quality and higher prices. Another large customer said that it was confident of finding alternatives but it was not confident that these would be competitively priced.

A third concerned large customer told the OFT that if one of the two merging parties does not win a particular tender, it is usually the other one. It also named its next most competitive option as approximately 10 per cent more expensive.

Three small and medium sized customers were concerned by the reduction in competition caused by the proposed merger and by the lack of alternatives to the merging parties.

Further, a number of companies which distribute the parties' panels or have done so in the past were concerned about higher prices or the risk of foreclosure of supply.

In contrast, the majority of third party customers were unconcerned and felt that they would always have outside options. In some cases customers were able to name other options such as Braithwaite, PFG, Decca and Brimar, that they felt could provide a competitive alternative to the parties. In other cases customers could not name alternative suppliers but were confident that there were other suppliers available.


The parties predominately overlap in the supply of glass fibre reinforced plastic (GRP) tanks. The OFT has assessed this proposed merger on the basis of one piece GRP water tanks and sectional GRP water tanks separately. For one piece tanks the appropriate geographic scope was found to be the UK, while for sectional tanks it was found to be the supply to the UK taking into account domestic suppliers using imported sectional GRP panels.

The OFT does not consider that the proposed merger raises competition concerns in regard to one piece GRP water tanks. The increment is small, a number of sizeable competitors will remain after the proposed merger and, in the main, third parties were not concerned about the proposed merger in regard to one piece GRP water tanks.

In regard to sectional GRP water tanks, the parties are by far the two largest suppliers in the UK. After the proposed merger, they will account for [40-60] per cent of the supply of sectional GRP water tanks in the UK (with an increment arising from the proposed merger of around [15-35] per cent) while all of their competitors account for less than [5-20] per cent each (most account for less than [ ] per cent). All of the evidence indicates that the parties are each other's closest competitor.

It may be the case that a number of existing competitors or entrants could collectively expand output in order to offset the loss of Balmoral which would occur as a result of this proposed merger. However, the OFT is not convinced that the threat of expansion by existing rivals supplied through imports or producing domestically would prevent the parties increasing prices to customers given the price differentials of imported materials and the ability and speed of existing competitors or new entrants to replicate Balmoral's network of sales representatives and relationships with key clients.

The OFT also indicates that if some customers do possess countervailing buyer power it is only a minority of customers who would not be able to protect other customers from price increases as a result of the merger.

Given its conclusion on the horizontal aspect of the proposed merger the OFT has not found it necessary to reach a view as to whether the proposed merger would enable the merged entity to foreclose downstream rivals by either refusing supply of sectional GRP water panels or increasing the cost of them.

Consequently, on the basis of the evidence before it, the OFT believes that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.


Where the duty to make a reference under section 33(1) of the Act applies, pursuant to section 73(2) of the Act the OFT may, instead of making such a reference, and for the purpose of remedying, mitigating or preventing the substantial lessening of competition concerned or any adverse effect which has or may have resulted from it or may be expected to result from it, accept from such of the parties concerned undertakings as it considers appropriate.

The OFT has therefore considered whether there might be undertakings in lieu of reference which would address the competition concerns outlined above. The OFT's guidance states that 'undertakings in lieu of reference are appropriate only where the competition concerns raised by the merger and the remedies proposed to address them are clear cut, and those remedies are capable of ready implementation'. [see note 1]

By way of undertakings, Killarney offered to [ ]. The OFT does not believe that such a remedy is clear-cut as it does not suitably address the OFT's horizontal concerns which form the basis for the reference decision. In particular, while it seeks to address rivals' foreclosure concerns, it does not restore a player comparable to Balmoral to the market and does not therefore address the direct loss of competition between the merging parties. Even if the merged firm is obliged to supply rivals in a fair and reasonable manner, this does not provide clear-cut assurance that such as remedy will defeat a price increase: Killarney has the ability an incentive to inflate the input costs of rivals to ensure they cannot realistically undercut the merged firm's higher prices. This concern alone renders the remedy unsuitable for undertakings in lieu, before considering the enforcement and monitoring costs of a regulatory remedy of this nature.


This merger will therefore be referred to the Competition Commission under section 33(1) of the Act.


1. Mergers: substantive assessment guidance, OFT516, May 2003, paragraph 8.3

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