Completed acquisition by Cholet Acquisitions 2 Limited of the UK landfill and energy business of Shanks Group plc

Affected market: Waste management

No. ME/1162/04

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.

The OFT's decision on reference under section 22 given on 17 September 2004

PARTIES

Cholet Acquisitions 2 Ltd (Cholet) is a special purpose vehicle formed at the direction of Terra Firma Investments (GP) 2 Ltd, for and on behalf of the Terra Firma Capital Partners II Fund (Terra Firma). Terra Firma manages a number of private equity funds and is the ultimate shareholder of Waste Recycling Group. (WRG) is active in the UK waste management services industry.

Shanks Group plc (Shanks) is a UK company listed on the London Stock Exchange. It is active in waste management with operations in the UK, Belgium and the Netherlands. Shanks' wholly-owned UK landfill waste disposal business comprises 15 operational landfill sites and contracts to operate seven local authority owned transfer stations. In addition it includes 'waste to energy' (WTE) operations generating electricity from landfill gas. The UK turnover (excluding landfill tax) for Shanks' landfill and energy business was approximately £[ ] million (see note 1) for the year ending 31 March 2004.

TRANSACTION

Cholet acquired Shanks' landfill and energy business on 1 July 2004. Shanks has retained all its other waste management interests, including its UK waste collection business and two joint venture landfill sites: Peckfield in West Yorkshire and Avondale in Scotland. The administrative deadline for review of this transaction is 17 September 2004 and the statutory deadline is 31 October 2004.

JURISDICTION

As a result of this transaction, Cholet and Shanks have ceased to be distinct. The UK turnover of Shanks' landfill and energy business exceeds £70 million, so the turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act) is satisfied. The OFT therefore believes that it is or may be the case that a relevant merger situation has been created.

ASSESSMENT

In relation to Chirk, the merger will eliminate competition between WRG (Gowy), (Llanddulas) and Shanks (Chirk) which will reduce the number of sites from five to four. However, there is a realistic prospect of new entry by Mersey Waste (Hafod) which will have a large level of consented void and be centrally located to local competition. In addition the merged entity will also face competitive constraints from the remaining competitors which taken together represents strong competition for the merged entity. In these circumstances, a substantial lessening of competition is not a sufficiently realistic prospect. 

In relation to Dogsthorpe, the merger will eliminate competition between WRG (March) and Shanks (Dogsthorpe) sites, which will nominally reduce the number of available sites for customers from five (including the transfer station) to four. However, WRG (March) is relatively small in size and the merged entity will face competitive constraints from the continued operation of the large Biffa (Eye) site. Furthermore there will be the continued presence of competition from SITA (Somersham) and the Bullimores transfer station. Therefore a substantial lessening of competition is not a realistic prospect.

Finally, with regard to the overlap in rail-linked landfill sites there is only one concerned customer and existing fixed term contracts will remain in place until at least 2008. Other customers appear unconcerned because of the prospects of new entry within this time frame and these are strong. At least two firms are actively seeking to enter and progressing their plans. The prospect of one of those sites becoming available by 2008 is sufficiently strong to be considered as a viable alternative for the present customers of rail-linked landfill sites.

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. Figure has been deleted at the request of the parties for reasons of commercial confidentiality.

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