Anticipated acquisition by Air Products Group of a controlling interest in CryoService Ltd

Affected market: Gas distribution

No. ME/3626/08

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 22(1) given on 16 June 2008. Full text of decision published 24 June 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

Air Products Group Limited (AP) is an international supplier of gases, chemicals and related equipment. In the UK, AP produces and distributes a range of gases by a variety of delivery modes.

CryoService Limited (CSL) is a UK based distributor of a range of gases by a variety of delivery modes, although does not produce gases itself. In the year to August 2007, CSL's turnover was £29.8 million.

TRANSACTION

AP previously acquired a 25 per cent shareholding in CSL in 1998. On 4 April 2008, AP agreed to purchase an additional 47 per cent shareholding, subject to regulatory approval, bringing the total CSL share capital owned by AP to 72 per cent.

The parties notified the OFT of the transaction on 21 April 2008. The administrative deadline is therefore 17 June 2008.

JURISDICTION

As a result of this transaction AP and CSL will cease to be distinct with AP increasing its shareholding to the level of a controlling interest. The share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met; the parties overlap in the bulk supply of oxygen and nitrogen and have a combined share of supply exceeding 25 per cent. 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 OFT received views from 10 customers and three competitors. Of these, four raised competition concerns as a result of the merger, relating to vertical issues, regional concerns in Scotland and supply to the drinks sector.

ASSESSMENT

The parties overlap in the supply of various gases by cylinder, bulk and micro-bulk delivery in the UK. While the OFT has not concluded on the relevant market, for the purposes of this assessment it has considered that each gas and each mode of distribution constitutes a separate market, with the exception of micro-bulk, following previous practice by the EC. Micro-bulk is however considered in so far as it impacts on the closeness of competition between the merging parties.

CSL's relatively small share of supply in all overlapping markets means that any increment will be small and thus there is no realistic prospect of a substantial lessening of competition. To the extent that micro-bulk and bulk are seen as differentiated, BOC remains as the largest supplier by this mode. Further, the limited size of CSL also means that the transaction is unlikely to raise any vertical issues.

In addition, the fact that AP currently holds a 25 per cent shareholding in CSL suggests that incentives (if any) for either foreclosure or co-ordination are unlikely to change as a result of this 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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