Completed acquisition by Origin Enterprises plc of Masstock Group Holdings Limited

Affected market: Fertilisers

No. ME/3556/08

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 6 May 2008. Full text of decision published 22 May 2008.

Please note that square brackets indicate figures or text which have been deleted or replaced at the request of the parties for reasons of commercial confidentiality.

PARTIES

Origin Enterprises (Origin) operates in the agri/nutrition sector in the Republic of Ireland and the UK, importing, blending and distributing fertiliser to the agricultural merchant trade.

Masstock Group Holdings Limited (Masstock) is a provider of agricultural input products and farm consultancy services. It principally operates through two trading subsidiaries - Masstock Arable (UK) Limited and Dalgety Agar Polska Sp z.o.o.. Masstock generated £191.6 million turnover in the UK in the last financial year.

TRANSACTION

Origin acquired 59.97 per cent of the entire issued share capital of Masstock on 1 February 2008, with an option to acquire all of the remaining shares. The OFT received a satisfactory submission on 6 March 2008.

The administrative deadline is 6 May 2008 and the (extended) statutory deadline is 2 June 2008.

JURISDICTION

As a result of this transaction Origin and Masstock have ceased to be distinct. The UK turnover of Masstock 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.

THIRD PARTY VIEWS

The OFT consulted a range of third parties at all levels of the supply chain. However, responses were relatively limited. Of the third parties that did respond, some expressed the vertical concerns set out below. Two were specifically concerned with the loss of a current (or potential) supplier while two expressed concern at potential preferential treatment Masstock may receive in the supply of fertiliser. However, all three indicated that alternative fertiliser suppliers existed post-merger.

ASSESSMENT

Both Origin and Masstock are involved in the supply of fertiliser in England, Scotland and Wales. Origin supplies primarily to wholesalers, merchants, agents on commission and buyer groups, while Masstock operates at the retail level and sells to end-users, that is, farmers.

The starting point for the OFT's assessment of the relevant markets were the previous Competition Commission (CC) and European Commission (Commission) decisions in the fertiliser industry. Third parties consulted by the OFT supported the product markets identified in these cases, including separate markets for straight and complex fertilisers, separate markets for Nitrogen, Phosphorous and Potassium fertilisers, and no clear distinction between compound and blended fertilisers. However, in relation to the geographic market, third parties suggested that there was some degree of sub-national competition in relation to the supply of fertiliser, contrary to the conclusions in previous CC and Commission decisions. The OFT took a cautious approach, and considered the possibility of sub-national competition in its competitive assessment. Overall however, similar issues arose in the competitive assessment irrespective of the various product and geographic markets identified.

While the parties considered themselves to operate predominantly at different levels of the supply chain, the OFT found that chains of supply in relation to fertiliser were relatively complex, and that there were a number of different routes to market for fertiliser producers. At least some customers saw Origin and Masstock as alternative suppliers of fertiliser, and the OFT therefore considered whether any competition issues arose at a horizontal level. However, on the basis of the parties' relatively small share of supply at a national level, and the presence of a large number of alternative providers at both a national and sub-national level, the OFT did not consider that there was a realistic prospect that the merger would raise competition concerns at a horizontal level.

The OFT did receive some concerns from third parties about the loss of a potential supplier, suggesting that Origin would supply Masstock exclusively, or would supply Masstock on more favourable terms than Masstock's competitors. The OFT found that the parties current relationship meant that any internalisation of supply would require a substantial realignment of their current demand/supply relationships, which would be particularly difficult given the price sensitive nature of the fertiliser market and the inefficiencies Masstock would experience purchasing solely from Origin. The OFT also found that even if Origin did foreclose supply of fertiliser to Masstock competitors, there were a number of alternative sources of direct and indirect supply available to these competitors. Given these factors, the OFT did not consider that there is a realistic prospect of the merger resulting in competition concerns at a vertical level.

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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