Anticipated acquisition by Neopost SA of PFE International Ltd

Affected market: Mail folding and inserting machines

No. ME/3354/07

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 and decision.

The OFT's decision on reference under section 33(1) given on 7 December 2007. Full text of decision published 13 December 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.

PARTIES

Neopost SA (Neopost) is a global supplier of a range of document management products including folders/inserters, mailing systems (including franking machines) and logistics systems for parcel delivery. In the year ended 31 January 2007, its total worldwide turnover was around £624 million and its total UK turnover was around £[ ] million.

PFE International Ltd (PFE) is a UK based supplier of folders/inserters. In the year ended 31 December 2006 its total worldwide turnover was around £29 million and its total UK turnover was around £[ ] million.

TRANSACTION

Neopost is to acquire the entire issued share capital of PFE and its wholly owned subsidiaries. The parties notified the transaction on 15 October 2007. The administrative deadline is 10 December 2007.
 
JURISDICTION

As a result of this transaction Neopost and PFE will cease to be distinct. The parties overlap in the supply of folders/inserters and have combined shares of supply in the UK in excess of 25 per cent, so 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 third parties were unconcerned about the merger. One competitor raised the concern that the merger will strengthen Neopost's position in the supply of mailroom folders/inserters, whilst a customer had concerns regarding supply post-merger. These concerns have been addressed in the competitive analysis above.

ASSESSMENT

The parties overlap in the supply of folders/inserters, which can be further sub-divided into three segments based on user environments: desktop; mailroom; and production. With regards to the latter segment, as Neopost is not present, competition concerns are therefore not considered to arise.

In relation to the supply of folders/inserters to the desktop segment, the transaction results in a very small increment to the merged entity's share of supply. In addition, Pitney Bowes, the largest supplier, will continue to act as a competitive constraint on the parties' behaviour post-merger. Furthermore, customers raised no concerns in relation to this segment.

For the supply of folders/inserters to the mailroom segment, the transaction results in a small increment to the merged entity's share of supply and the majority of third parties considered that Neopost and PFE were not particularly close competitors. The OFT considers that these factors, combined with the existing competition from a number of remaining suppliers, will be sufficient to constrain the parties behaviour post-merger.

Consequently, the OFT does not believe 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.

DECISION

This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.

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