Commission Grants Clearance For Reward To Acquire Southern Hospitality

The Commerce Commission has granted clearance for Reward Supply Co Pty Limited to acquire 100% of the shares of Southern Hospitality Limited.

Reward is an Australian company that supplies food service solutions in Australia and is a member of the ECF Group, an international distribution company specialising in the supply of food service solutions. The ECF Group operates in New Zealand through Burns & Ferrall Limited, trading as Reward NZ, and Safco Limited.

Southern Hospitality is a New Zealand supplier to the New Zealand hospitality and food service industry. Established in 1989, it has 12 showrooms nationwide and describes itself as a “a major player in the catering and hospitality industry providing a multitude of services and products.”

The Commission raised potential concerns about the likely competitive effects of the proposed acquisition on the supply of commercial kitchen equipment (such as combi ovens, refrigeration and dishwashers) on a standalone basis, and on the supply of ‘project’ services to fitout a new or refurbished kitchen (where design, equipment supply and fitout will often be carried out as a single service).

However, after further investigation, Chair Dr John Small said the Commission is satisfied that the proposed acquisition is unlikely to substantially lessen competition in any New Zealand market.

“Reward and Southern Hospitality are the two largest resellers of commercial kitchen equipment in New Zealand. We initially had concerns that the acquisition would enable the merged entity to raise prices or lower quality to customers. However, evidence received since our Statement of Issues has satisfied us that this is unlikely.”

“There are many other resellers of commercial kitchen equipment in New Zealand (on both a standalone basis and as part of a ‘project’). While these rival resellers will be smaller than the merged entity, or focus on certain customer types or regions, many of the merging parties’ customers indicated they are viable alternatives. Our enquiries also indicated that several competitors are either already planning to expand, or would expand if prices rose.”

“Some customers also stated they could buy directly from manufacturers or self-supply certain parts of a project, and some manufacturers indicated they could support a smaller reseller if necessary.”

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.

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

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