The Australian competition watchdog has given the parent company of Winc the green light for its proposed acquisition of fellow office supplies retailer, OfficeMax.
While it remains to be seen whether the decision will result in a potential bidding war for OfficeMax, the Australian Competition and Consumer Commission (ACCC) said just weeks ago that it would not oppose a proposed acquisition of OfficeMax Australia by competing office products retailer, Complete Office Supplies (COS).
Now, the ACCC has subsequently said it will not oppose the proposed acquisition of OfficeMax Australia (OfficeMax) by Platinum Equity.
Platinum Equity, a US-based private equity investment firm, struck a deal to acquire Staples’ Australian and New Zealand operations in March, subsequently rebranding the business as Winc.
In April, Platinum Equity moved its local office retail play up a gear, inking a deal to acquire Office Depot’s OfficeMax business in Australia and New Zealand. However, Complete Office Supplies’ own proposed acquisition for the business was given the green by the ACCC on 16 November.
In August, however, the ACCC put the brakes on Platinum Equity’s plans to boost its office retail presence in Australia with the acquisition of the local operations of both OfficeMax and Staples, flagging “concerns” about the proposed deal.
The ACCC now notes that Winc and OfficeMax both supply office products to commercial and government customers in Australia, and has conceded that the proposed acquisition could hamper competition, but ultimately should be allowed to go ahead.
“Following extensive market inquiries and analysis of documents and data, the ACCC has decided not to oppose this transaction,” ACCC chairman, Rod Sims said. “The ACCC believes the transaction will lessen competition but doesn’t reach the threshold of causing a substantial lessening of competition.
“Any deal that sees the largest supplier acquiring the second largest in a market will require very close scrutiny. However, in a finely balanced decision the ACCC found that a combined Winc-OfficeMax would continue to face competition from the remaining key suppliers, Complete Office Supplies (COS) and Lyreco.”
“Many large commercial and government customers put their contracts out to tender, and both COS and Lyreco have recently been successful in winning customers from Winc and OfficeMax,” he said.
As a result, Sims said the ACCC considers that COS and Lyreco, combined with the ability of large customers to switch suppliers and to purchase products off-contract, are likely to provide a sufficient competitive constraint on a combined Winc-OfficeMax business.
“The ACCC would also expect that if prices and returns increased through an exercise of market power by a combined Winc-OfficeMax, it is likely that other existing suppliers of office products would seek to grow their market share,” Sims said.
“The ACCC contacted many large commercial and government customers. While some were concerned about the transaction, there were also many that didn’t engage with the ACCC. Where we are considering a horizontal merger such as this, we rely heavily on the views of customers.”