Completed acquisition by Bourne Leisure Holdings Limited of the Rank Holiday Division

No. ME/155/00

Report under section 125(4) of the Fair Trading Act 1973 of the Director General's advice, dated 21 December 2000, to the Secretary of State for Trade and Industry under section 76 of the Act

The Parties

Bourne Leisure Holdings Limited ("Bourne") is a newly incorporated holding company which contains the existing interests of Bourne Leisure Group and its subsidiaries.

Bourne Leisure Group ("BLG") is a privately owned UK holiday park operator. It is principally concerned with the operation of 20 caravan parks, which includes the provision of pitches for caravan holiday homes and other holiday accommodation. BLG also operates retail facilities e.g. bars, shops and restaurants at these sites and sells package holidays, based on its facilities, under the British Holidays brand. BLG's consolidated turnover was £X million (See note 1) in the year ending 31 December 1999.

Rank Holiday Division ("Rank") is the largest operator of holiday parks in the UK. It operates under four principal brands. These are:

Haven which operates a range of parks, where accommodation ranges from caravans and tents to chalets and lodges.
Butlins. Rank operates three Butlins parks, where accommodation is principally in chalet accommodation.
Warner, which offers short breaks for adults, in four star hotels and in classic resorts with chalets.
Oasis. , a single park in the Lake District with chalet accommodation.
Rank's 1999 turnover was £X million (See note 1). This included parks in France, Italy and Spain, amounting to £X million (See note1).

The Transaction

Bourne has acquired Rank for approximately £X million (See note 1) in cash, with scope for a further performance-related fee after X years (See note 1) of operation.

Jurisdiction

The transaction satisfies the assets test of the FTA. It may also satisfy the share of supply test with respect to the supply of static caravan sites within a significant part of the UK but it is not necessary for me to determine this. The ECMR does not apply.

Assessment

Relevant Markets

The parties overlap in markets affected by this merger are for the provision of sites for static caravans, either for ownership or hire, and in. There is also an effect on the upstream market for the purchase of static caravans. Demand to buy static caravans as holiday homes is probably largely distinct from caravan hire. Families purchasing a static caravan make a long term commitment, involving significant outlay. A new static caravan is sold for around £20,000 and the owner rents a pitch on a static caravan site for an annual fee of around £1000 for an average of seven years. Such caravans very rarely leave their original site and will normally be sold on the site rather than moved. Such caravans are, on average, owned for about seven years, during which time they will be used by the families for annual holidays and weekends. It is possible that other forms of ownership (e.g. of mobile caravans) may be marginal substitutes but these entail a different consumer experience to fixed sites.

There is no comparable capital expenditure by consumers who choose to hire a caravan. There is a wide range of alternative holiday accommodation at similar prices with which caravan hire probably competes. It therefore seems to me unlikely that the hire of caravans for holidays constitutes a distinct market. The market for the hire of such holiday facilities is likely to be at least national in geographical scope.

I have considered whether the relevant economic market for static caravan ownership is likely to be regional or local. I believe that consumers will examine a range of possible locations for a holiday caravan before making such a large purchase decision. The industry considers that most customers will drive for up to two hours to their preferred site. This view is supported by summary information I have seen on the origin of customers using a selection of parks in England and Wales.

Horizontal Issues

The parties will have a significant share in the supply of static caravans for holiday hire. There is, however, a wide range of alternative holiday accommodation at similar prices, However, as already noted, such hire probably does not constitute a distinct market. If it is widened to encompass other comparable holiday accommodationsuch that the, the parties have estimated their market share in comparable holiday accommodation at less than 5%. This estimate seems reasonable and this businessmarket will not be considered further.

The parties have a combined share of 10-20% (See note 2) in the national market for the provision of static caravans as holiday homes, which does not give rise to concern. This is a significant market, to which families make a long term commitment, involving significant outlay. I consider that the relevant economic market is likely to be regional. Regional market shares are more difficult to determine, but I am advised that the merger has not created a share above 25% in any region of the UK.

I consider that bBarriers to entry are said to be high, as there is a shortage of suitable sites and planning permission is not always readily obtainable. However, within each region there are a number of competing parks, with a range of sizes and facilities, such that consumers have a wide choice of parks within each region. It appears to be relatively easy for competitors to upgrade their sites to meet consumer demand.

Vertical issues

The parties will have a combined share of purchases of static caravans within the UK amounting to some 10-20% (See note 2) of production by value. This may provide them with a degree of buyer power. I understand there are three main suppliers of caravans, all of whom are active in exporting. I do not consider the enhanced buyer power to raise significant concerns.

Third Party Views

Competitors and suppliers were generally not concerned by the merger.

Conclusion

On the basis of the analysis set out above I do not consider this merger raises significant competition concerns.

I therefore conclude and recommend that you should not refer this completed merger to the Competition Commission.

Notes

1. This figure has been excised at the request of the parties
2. The precise figure has been excised at the request of the parties. They have given their consent for this range to be published

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