ACCC to assess landmark automotive merger

By Nick Hall | 01 May 2019 View comments

The Australian Competition and Consumer Commission (ACCC) is promising to keep a watchful eye over a newly proposed automotive merger.

In April, Queensland-based automotive group AP Eagers lodged an application with the ASX to merge with Western Australian business, Automotive Holdings Group (AHG).

AP Eagers already owns 28 per cent of AHG’s shares, with the brand eager to absorb up the remaining share.

The application is the first merger authorisation considered by the ACCC since 2017 reforms restored the watchdog’s ability to oversee.

“Under the new process, the application comes to the ACCC first rather than the Australian Competition Tribunal,” ACCC Chair Rod Sims said.

The ACCC may grant authorisation for the proposed automotive merger if it is satisfied that the deal is not likely to substantially lessen competition. Similarly, where the public benefits outweigh the detriments.

Background on the automotive merger

AP Eagers and AHG are the two largest automotive retailers in Australia. AHG operates 105 dealerships across WA, NSW, Victoria, Queensland and New Zealand with a franchise network of 179.

Both companies supply new and used cars, trucks and buses, as well as associated products and services. These include car repair and servicing, authorised car parts, insurance and finance.

The proposed merger comes at an interesting time for the automotive industry, with reports from the Federal Chamber of Automotive Industries indicating new vehicle sales have fallen consistently for 12 months.

Subsequently, AHG shares have dropped significantly in price, allowing AP Eagers to move in and snatch all remaining shares.

Assessment process

Sims said the ACCC would assess the potential outcome for consumers should the merger go ahead.

“The ACCC’s assessment will focus on the likely effects of the proposed acquisition on competition, and under the authorisation test the ACCC can also consider whether any public benefits likely to arise from the proposed acquisition would outweigh the public detriments,” Sims said.

The authorisation will follow the formal steps set out in the Competition and Consumer Act. As a result, the ACCC will have 90 days to make a determination on the application.

Interested parties are encouraged to produce submission, with the ACCC has commencing public consultation this week.