The Competition and Markets Authority (CMA) has provisionally ruled that a merger between two UK metal recycling companies is “not in the best interests” of customers and suppliers in the scrap metal sector.
On Friday (June 1), the CMA said that the potential merger between European Metal Recycling (EMR) and Metal and Waste Recycling would be likely to reduce competition and lead to a worse deal for suppliers and customers.
Now, for the deal to proceed, part of the businesses, such as a site or wharf in the London area, is likely to have to be sold before it can be approved.
History
The probe relates to EMR’s acquisition of Metal and Waste Recycling in August 2017 (see letsrecycle.com story). The following September, the CMA then issued an initial enforcement order before launching an official merger inquiry two months later.
The CMA’s final report is expected in July
In January 2018, the authority called on the EMR to offer “acceptable undertakings” to avoid a phase 2 investigation into its merger.
The following February, the CMA decided it would launch the phase 2 investigation after an investigation identified competition concerns.
Phase 2
A phase 2 investigation is often referred to as a “full investigation” to see if there is a substantial lessening of competition. The CMA could then issue a prohibition on the merger if it is deemed necessary.
The phase 2 investigation in this case found that that EMR is “by far the biggest” metal recycler in the UK, according to the CMA.
MWR, though smaller, is EMR’s strong rival in London, in the South East for shredder feed, and in the West Midlands and North East when buying scrap from large industrial suppliers, the investigation found.
The CMA added that while some other metal recyclers sell new production steel to UK mills, it provisionally found that competition would be affected by the merger as these firms would not provide the material in sufficient volumes.
Next steps
Now, the CMA has invited comments on both of its provisional findings and its possible remedies, “which include selling all or part of one of the merged companies”. The deadline for any responses is mid-June, and the final report will be published next month.
The statutory deadline for the CMA’s final report is 24 July 2018.
A spokesperson for EMR said: “These are preliminary findings and the process with the CMA is ongoing, it is therefore too early to comment at this point in time.”
Sims Metal
The CMA is also currently looking at another deal in the metals recycling sector. A month ago (4 May 2018) the authority issued an initial enforcement order to Sims Metal Management, which put its takeover of Morley Waste Traders temporarily on hold (see letsrecycle.com story )
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Source: letsrecycle.com Metal
