Completed acquisition by Bayard Capital Partners PTY Ltd of Landis and GYR

Affected market: Electricity meters

No. ME/1242/04

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.

Please note that square brackets indicate figure or text excised at Bayard's request or exact figure replaced by a range

The OFT's decision on reference under section 22 given on 15 November 2004

PARTIES

Bayard Capital Partners Pty Ltd (Bayard) is the parent company of a utility metering business known as 'Ampy', which it acquired in August 2003.  Ampy  is the largest Australian manufacturer of electricity meters and includes Ampy Automation Digilog Ltd in the UK.  Ampy has production facilities and sales companies in the UK, Australia and China.  In the UK, Ampy is active in the sub-assembly and final assembly of residential electricity meters, including electronic pre-payment meters.

Landis & Gyr (Landis) is a group of companies principally active in the manufacture of electromechanical, electronic credit and prepayment electricity meters and gas meters, including prepayment meters, energy data acquisition, processing software and systems ripple control receivers.  Landis also refurbishes meters on behalf of utilities in the UK.  It has manufacturing facilities in Greece, Mexico and India, and specialist low-volume sites or dedicated assembly lines in the UK and elsewhere.   Its sales are either through its sales offices or through cooperation with local companies acting as distribution partners.  In 2003, Landis' EU turnover was [  ], of which €41.9 million (approximately £30.6 million) was attributed to the UK.

TRANSACTION

Bayard, through its wholly-owned subsidiary, Bayard Metering (Europe) GmbH, has acquired Landis.  The (then) anticipated transaction was notified on 12 August 2004 and the transaction completed on 7 October.  The administrative deadline was 15 October 2004.  The parties submit that the rationale for the transaction is to assist Bayard in expanding its existing business into new markets.  In Europe, Bayard's metering activities are currently focussed mainly on the UK, while Landis has a presence in most other European countries.

JURISDICTION

As a result of this transaction, Bayard and Landis have ceased to be distinct.  The parties overlap in the supply of electricity meters in the UK and the share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met in respect of these goods.  The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.

On 6 July 2004, the European Commission received a Reasoned Submission referral request pursuant to Article 4(5) of Regulation 139/2004 (the EC Merger Regulation) on the grounds that the transaction should be examined by the Commission as it was notifiable in more than three Member States.  On 27 July 2004, the OFT vetoed the referral request since the main effects of the merger appeared to be felt in the UK in particular in respect of prepayment meters, the UK being the only Member State in which such meters are used.  Since a Member State competent to review the merger had disagreed with the request within 15 working days of receiving the Reasoned Submission, the transaction remained subject to the applicable national competition laws on merger control.  The transaction has since been cleared in Spain and Poland. It has also been cleared in Australia.

ASSESSMENT

The parties overlap in the supply of electricity meters.  No concerns arise in respect of credit electricity meters, which represent the great majority of electricity meters sold and installed in the UK.  The OFT's investigation therefore focussed on the supply of prepayment electricity meters, which represent around 15 per cent of all electricity meters in the UK.  There are four existing prepayment electricity meter technologies.

Notwithstanding the high combined shares of sales in respect of prepayment meters generally and particularly in meters based on magnetic card and smart card technology, the weight of evidence highlights a number of competitive constraints which mean that reliance only on share of sales data for narrow prepayment technology meter categories would misrepresent the competitive impact of the merger. 

Apart from continuing competition from Actaris and PRI supplying meters based on existing technologies, perhaps the most important constraint in this sector is the extent of dynamic competition from new meter technologies.  Electricity meter supply has historically been characterised by the emergence of new technologies that rapidly win both acceptance and share.  This trend can be expected to continue as competitors have brought new technologies to the marketplace which are already being adopted by customers, acting as a competitive constraint on the parties' sales of older (and declining) magnetic card technology meters.  In addition, the ability of customers to exercise a degree of buyer power, can be expected to represent a further constraint on the merged entity's behaviour.  

As regards the possibility of coordinated effects, there are insufficient indications to suggest that the merger might give rise to a realistic prospect of such coordinated interaction.  The possibility of the two leading meter suppliers being able to align on the terms of coordination does not seem at all realistic given their differing product ranges and positions at different stages of the innovation cycle.

Finally, concerns regarding possible conglomerate effects were not substantiated by the market investigation and competitive analysis.

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.

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