Anticipated acquisition by G4S Cash Services (UK) Limited of Abbotshurst Group plc

Affected market: Security services

No. ME/2941/07

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, undertakings in lieu, assessment and decision.

The OFT's decision on reference under section 33(1) given on 18 May 2007. Full text of decision published 25 May 2007.

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

PARTIES

G4S Cash Services (UK) Limited ('G4S') is a wholly owned subsidiary of Securicor Group Limited, the ultimate parent of which is G4 Securicor plc. G4 Securicor plc is a global provider of security services (including manned security and justice services), security systems and cash services. Its UK business operates through a network of 46 branches and 10 cash centres located throughout the country.

Abbotshurst Group plc ('Abbotshurst') is a public limited company and the parent of Security Plus Limited ('Security Plus'). Through Security Plus, Abbotshurst is a regional provider of cash-in-transit, guarding and smoke box repair services. Security Plus operates from six branches in the Midlands and the North of England. Abbotshurst's UK turnover in the year ended 30 September 2006 was [£15 to 20] million.

TRANSACTION

G4S proposes to acquire the entire issued share capital of Abbotshurst and its subsidiaries including Security Plus. The transaction is conditional on obtaining merger control clearance from the Office of Fair Trading ('OFT').

The parties notified a satisfactory submission to the OFT on 16 March 2007. The OFT's administrative deadline was 16 May 2007.

JURISDICTION

As a result of this transaction G4S and Abbotshurst will cease to be distinct. The parties overlap in the supply of cash-in-transit services, for which their combined share of supply is in excess of 25 per cent. Therefore, the share of supply test in section 23 of the Enterprise Act 2002 ('the Act') is met. The 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.

THIRD PARTY VIEWS

The majority of competitors who responded to the OFT expressed concerns regarding the merger. A majority of customers and indeed, all customers of Security Plus, who responded to the OFT were concerned. Specific concerns are addressed in the full text of the decision.

ASSESSMENT

The proposed merger combines the largest national provider of external CIT services with a significant regional provider of external CIT services for large nationwide customers, local customers and flexible national customers. For large nationwide customers there will be no change in the number of competitors present and therefore the merger will not significantly lessen competition in relation to these customers.

On a regional basis, in the Midlands and the North of England, high estimated market shares and analysis of the G4S bid data suggests that Security Plus is a particularly strong competitor for local and flexible national customers. For these customers, the OFT believes that the merger represents a reduction from three to two major CIT providers (G4S/Security Plus and Loomis). Evidence obtained from third parties indicates that Brinks and the Post Office do not currently provide a significant competitive constraint on the parties. The OFT believes that expansion by them would be insufficient, in terms of likelihood, time and/or scope, to offset the loss of competitive constraint currently provided by Security Plus in the Midlands and the North of England resulting from the merger. The OFT also believes that the presence of a number of smaller, regional competitors is insufficient to offset the loss of competition resulting from the merger.

Evidence obtained by the OFT from third parties suggests that while new entry and expansion can occur at a regional level, there has been little evidence of this occurring in the past and it may take some time for competitors to develop the reputation necessary to become a significant competitor.

The OFT therefore believes that the removal of Security Plus as a highly competitive provider of CIT services can be expected to give rise to an increase in prices and/or a reduction in quality of service to local and flexible national customers in the Midlands and the North of England.

Consequently, 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.

UNDERTAKINGS IN LIEU

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 Mergers Substantive Assessment 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]

The parties indicated to the OFT that in order to remedy any substantial lessening of competition identified by the OFT and to avoid a reference to the Competition Commission, they would be prepared to offer behavioural undertakings such that [ ].

The OFT considers that the behavioural undertakings offered by the parties fail to meet the criteria set out in the OFT's Mergers Substantive Assessment Guidance. They do not restore the competitive dynamic lost as the result of the merger and are not clear cut or capable of remedying the adverse competition effects that this merger will give rise to. The duty to refer therefore remains.

DECISION

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

NOTE

1. Mergers Substantive Assessment Guidance, paragraph 8.3.

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