Wolseley/Kooltech remain committed to merger deal

UK: Kooltech and Wolseley are said to be committed to addressing concerns raised by the Competition and Markets Authority regarding the proposed takeover announced at the beginning of this year. 

The companies were responding to concerns raised by the Competition and Markets Authority (CMA) that the acquisition of Kooltech by Wolseley UK could leave customers in Aberdeen facing higher prices or lower quality services.

The deal announced in January proposed to add Kooltech’s eight air conditioning and refrigeration branches to Wolseley’s 560-branch builders’ merchant operation. The acquisition, which was originally expected to have been completed by the middle of this year, fell under the gaze of the CMA in September

Today, the CMA said that following a phase 1 investigation, it had provisionally found that the deal raised competition concerns in Aberdeen – “potentially leaving customers to face higher prices or lower quality services”. 

“The merged business will continue to face sufficient competition from rivals in most locations. But the two companies are currently the only wholesalers of AC and refrigeration products in Aberdeen, so would face very limited competition after the merger. This could lead to higher prices and lower quality services, such as reduced availability of stock, for customers in that area,” the CMA said in a press statement

Responding to the announcement, Kooltech commercial director Jonathan Brown said: “Both Kooltech and Wolseley remain committed to completing the deal, and we will be working closely with them, and the CMA to alleviate any concerns, in order to complete the acquisition as soon as possible.

“In the meantime, both businesses will continue to operate as usual,” he added.

Wolseley has 18 Wolseley Climate and 30 dual-branded branches shared between Wolseley Climate and Wolseley Pipe through which it sells AC and refrigeration products.

The CMA found no competition concerns at nationals level as they compete against a number of close competitors, naming Beijer Ref, TF solutions, Smith Brothers, FSW and OEM suppliers such as Mitsubishi Electric and Daikin. It was estimated that the merged entity would have a relatively modest market position, with a share of supply of around 20-30%

However areas of possible concern identified were in Cambridge/Peterborough and Aberdeen. The CMA found that, despite the limited number of close competitors within the Cambridge/Peterborough catchment areas, Wolseley and Kooltech would continue to face sufficient competition there, but also from additional providers just outside the catchment areas.

In Aberdeen, the CMA found that Wolseley and Kooltech were close competitors and that the merged entity would be the only remaining provider of AC and refrigeration products in the area.

Wolseley and Kooltech now have until 30 November to offer an undertaking which might be accepted by the CMA to address the substantial lessening of competition concerns. If no such undertaking is offered, or the CMA decides that an undertaking offered is insufficient to remedy its concerns to the phase 1 standard, then the CMA will refer the merger for an in-depth phase 2 investigation.

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