Regulator refers sale of SIG division to Phase 2 probe
INSULATION GIANT SIG said the Competition and Markets Authority (CMA) has referred the £37.5m sale of its Building Solutions division for an in-depth Phase 2 investigation.
Sheffield-based SIG agreed to Kingspan’s £37.5m offer for the business last October. The CMA launched a Phase 1 investigation which found the deal “could leave the merging companies’ customers, typically building contractors, with few alternative suppliers to choose from”.
Kingspan is the leading UK provider of standard foam sandwich panels, which are used as insulated cladding on commercial and industrial buildings such as large waste facilities.
The CMA said Kingspan already owns a number of businesses that supply these products in the UK, including Joris Ide. It added that Building Solutions also sells a range of insulation and specialist construction products through a variety of businesses, including Steadmans, Trimform, Advanced Cladding and United Roofing Products.
In a statement, the CMA said: “Kingspan and Building Solutions are two of only three key suppliers of standard foam sandwich panels in the UK and would only face serious competition from one other UK-based supplier
– Tata Steel – after the deal. Competition from suppliers of products imported from outside the UK and suppliers of other products sometimes used as insulated cladding is also very limited.”
Colin Raftery, CMA senior director, added: ”Foam sandwich panels are widely used in nonresidential buildings across the UK, such as supermarket distribution centres, hospitals and police stations. Sales of foam sandwich panels in the UK amounted to about £200m last year, so they account for an important part of the construction costs faced by businesses and public bodies.
“Kingspan is by far the largest player in this market and this deal would involve it buying up one of its only two meaningful competitors. So, we’re concerned that the deal could damage competition, resulting in higher prices or lower quality products.
While the CMA is conscious that the construction sector is expected to be heavily impacted by the coronavirus pandemic and see a considerable slowdown of activity in the near term, these two suppliers are expected to remain important competitors in the longer term.”
Kingspan and Building Solutions must address the CMA’s concerns within five working days.