Completed acquisition by Smiths News Trading Limited of a number of assets of Surridge Dawson Limited

Affected market: Newspaper and magazine distribution

No. ME/4179/09

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 22(1) given on 21 August 2009. Full text of decision published 28 August 2009.

PARTIES

Smiths News Trading Limited (Smiths) is active in the supply of wholesale newspaper and magazine distribution in the UK, with 44 distribution centres throughout England and Wales. It delivers newspapers and magazines to approximately 25,000 retail customers daily. Smiths is a wholly-owned subsidiary of Smiths News plc, which was created as a result of the de-merger of the WHSmith Group on 1 September 2006.

Surridge Dawson Limited (Dawson) was active in the supply of wholesale newspaper and magazine distribution in the UK, with 15 full branches and 14 sub-depots. Prior to the transaction, it delivered newspapers and magazines to approximately 14,000 retail customers daily. It is a subsidiary of Dawson Holdings plc, which has three other subsidiaries. Dawson Holding plc's turnover for the financial year ending 27 September 2008 was £690.2 million. Separate figures for the UK turnover for Dawson during the same period are not available.

TRANSACTION

The transaction relates to the acquisition by Smiths of certain assets from Dawson, which took place on 3 August 2009. As part of the acquisition, Smiths took responsibility for leasing depots located in territories where it has been appointed by publishers as the chosen wholesaler from the expiry of Dawson's existing distribution contracts, together with related plant equipment and machinery, customer records and a number of Dawson employees (collectively referred to as 'the Dawson Assets'). The OFT is satisfied that the combination of assets being transferred to Smiths as a result of this transaction constitute an 'enterprise' for the purposes of section 23(1) of the Enterprise Act (the Act).

Smiths will enter into new distribution contracts with the publishers, on transitional terms, to distribute their titles in territories currently serviced by Dawson but which will transfer to Smiths, during the period between completion of the acquisition and the entry into force of Smiths' new contracts (on expiry of Dawson's existing contracts). Accordingly, the transaction will enable Smiths to distribute newspapers and magazines in territories for which it has already been appointed as the chosen wholesaler by the relevant publisher from the expiry of Dawson's existing distribution contracts.

The statutory deadline under section 24 of the Act is 2 December 2009. The administrative target date for the OFT to announce a decision in this case is Monday 7 September 2009.

JURISDICTION

As a result of this transaction Smiths and the Dawson Assets have ceased to be distinct. Both these entities overlap in the supply of newspaper and magazine distribution and at least one quarter of all services of that description in the UK will be supplied by Smiths following the transaction.  Therefore, the share of supply test in section 23 of the Act is met.

The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.

ASSESSMENT

The parties overlap in the supply of wholesale newspaper and magazine distribution services to publishers and to retailers. The transaction relates to the acquisition by Smiths of certain Dawson Assets in territories where it has been appointed by publishers as the chosen wholesaler from the expiry of Dawson's existing distribution contracts. Although the OFT normally relies on the pre-acquisition conditions as the appropriate proxy for the counterfactual, in this case, given the structural changes in the market, the OFT considers that the only realistic counterfactual to the transaction is that the Dawson Assets would have exited the market. Accordingly, in light of this counterfactual, the acquisition by Smiths of the Dawson Assets would have no effect on competition in the next tender round in 2014.

Consequently, the OFT does not believe that it is or may be the case that the transaction 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 transaction will therefore not be referred to the Competition Commission under section 22(1) of the Act.

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