Fletcher Distribution Cleared To Acquire Tumu Stores And A Frame And Truss Plant

The Commerce Commission has granted clearance for Fletcher Distribution Limited (FDL), (a wholly-owned subsidiary of Fletcher Building Limited that operates the national network of Placemakers stores), to acquire six building products stores, and a frame and truss manufacturing plant, from Tumu Merchants Limited (Tumu). The six Tumu stores (which until recently operated under the ITM banner) are located in Gisborne, Napier, Hastings, Havelock North, Dannevirke and Masterton. The frame and truss manufacturing plant is located in Hastings.

In reaching its decision, the Commission considered the potential impact of the proposed acquisition on competition for the supply of building products to trade customers in the Wairarapa and Hawke’s Bay, as well as national trade customers, predominantly group home builders. It also considered the potential competition impact on the manufacture and supply of frame and truss.

Chair Anna Rawlings says the Commission was satisfied that the acquisition is unlikely to substantially lessen competition in any New Zealand market.

“We are satisfied that the merged entity will be constrained by competition from CARTERS and Mitre 10 in relation to the supply of building products to trade customers in the Wairarapa and Hawke’s Bay, and Bunnings in the Wairarapa as well,” says Ms Rawlings.

“Further, we are satisfied that the acquisition, and Tumu’s recent exit from the ITM group, is unlikely to significantly impact ITM’s ability to compete for national customers such as group home builders. ITM will still have a significant network of stores across New Zealand.

“The acquisition is also unlikely to increase FDL’s incentive or ability to foreclose rival merchants’ access to key building supplies.

“Finally, we are satisfied that competition in the manufacture and supply of frame and truss is unlikely to be significantly impacted, given the limited pre-merger competition between the parties and the presence of several other manufacturers and suppliers.”

A public version of the written reasons for the decision will be available on the Commission’s case register in due course.

Background
We will give clearance to a proposed merger if we are satisfied that the merger is unlikely to have the effect of substantially lessening competition in a market. The test under section 47 focuses on whether existing competition is likely to be substantially lessened as a result of an acquisition in any relevant market related to that that acquisition. This is a different analysis to that being undertaken in the Residential Building Supplies Market Study, which is considering the factors that may affect competition for the supply or acquisition of key building supplies. The market study looks at whether competition for key building supplies is working effectively and, if not, why not and how competition could be improved.

The conclusions we have reached in relation to our decision on clearance are specific to the facts of this acquisition and whether competition in the affected regions would be lessened substantially by it. Our work on the Residential Building Supplies Market Study is ongoing and will consider a range of matters in addition to competition at a merchant/distribution level. A draft report into our market study will be available from 4 August.

Further information explaining how the Commission assesses a merger application is available on our website.

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