Completed acquisition by Bunzl Retail Supplies Limited of Southern Syringe Services Limited and Universal Hospital Supplies

Affected market: Healthcare supplies

No. ME/2573/06

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, third party views, assessment and decision.

The OFT's decision on reference under section 22(1) given on 21 November 2006. Full text of decision published 5 December 2006.

Please note that square brackets indicate figures or texts which have been deleted at the request of the parties for reasons of commercial confidentiality.

PARTIES

Bunzl plc (Bunzl) supplies a range of consumables into several customer sectors, including cleaning and hygiene products, through its UK subsidiary Bunzl Retail Supplies Limited[1]. Bunzl's trading division, Shermond, imports and supplies medical consumables[2] direct to the NHS and to distributors in the UK.

Southern Syringe Services Limited (SSS) is a distributor for medical and surgical products[3]. It supplies both hospital and non-hospital customers (such as nursing homes) throughout the UK. It also supplies some non-food consumables (predominantly cleaning and hygiene products) to the healthcare sector. SSS was, prior to the merger, ultimately controlled by John Denman and his family. They also controlled Universal Hospital Supplies Limited (UHS), which has also been acquired by Bunzl as part of this transaction. UHS exclusively sells a number of surgical and medical consumables to SSS.

The combined UK turnover of SSS in the financial year to 31 December 2005 was some £182 million.

TRANSACTION

Bunzl completed the acquisition of SSS on 4 July 2006. The statutory deadline, as extended, expires on 21 November 2006, which is prior to the administrative deadline.

JURISDICTION

As a result of this transaction, Bunzl and SSS have ceased to be distinct. The UK turnover of SSS exceeds £70 million, so the turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act) is satisfied. The OFT therefore believes that it is or may be the case that one or more relevant merger situations have been created.

THIRD PARTY COMMENTS

We contacted a large number of third parties in the assessment of this case. The vast majority either did not respond or raise concerns. A small number of competition concerns were raised and these are addressed in the assessment. 

ASSESSMENT

The merging parties overlap in supply of cleaning and hygiene products into the healthcare sector. Post merger they supply [less than 15] per cent[4] (increment one per cent) nationally, they face sizeable alternative suppliers and the merger has not generated third party concern. Therefore the merger does not give rise to any competition concerns with regard to this segment.

The parties also overlap in the supply of medical consumables to the healthcare sector. This has been considered in relation to several routes to the end customer (direct from the importer or manufacturer and via wholesaler/distributor) and types of end-customer (NHS hospitals, private hospitals and non-hospital customers). On this basis, the merger represents only minimal increments (below 5 per cent) to the parties' existing shares of supply in a small number of products. Customers contacted by us in this inquiry had no horizontal competition concerns. Thus, we do not expect this merger to reduce competition on horizontal level in the supply of medical consumables to the healthcare sector in the UK.

Three third parties were concerned about the vertical effects of the merger between Bunzl and SSS. On the available evidence, the OFT has concluded that the merged entity will not have the ability or incentive to foreclose the route to market to other manufacturers or importers of medical consumables. This is because: (i) there are alternative routes to market; (ii) Bunzl's range of products is such a small proportion of that distributed by SSS that any increase in incentive is immaterial; and (iii) the fact that customers can, and some already do, obtain their supplies through routes other than SSS suggests that it would not be in the merged entity's interests to cease supplying rival products.
 
Consequently, the OFT does not believe that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.

NOTES

1. Bunzl plc has requested that it is noted it also sells cleaning and hygiene products through a number of other subsidiaries.
2. Including examination gloves, swabs, dressing packs, face masks, overshoes, tongue depressors.
3. Such as those named in footnote 1 together with many others including mid-stream urine connection kits, oxygen and suction bubble tubing, sterile connecting tubing, kwills, bile bags.
4. Bunzl has requested that it is noted this share of supply is estimated. See paragraph 10.

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