DCC’s acquisition of a number of businesses from Total Downstream UK has been referred to the British Competition Commission.
The Office of Fair Trading (OFT) said made the decision as it was concerned the merger would remove a key competitor in the supply of oil products to non-bulk customers in the UK.
The OFT said GB Oils, which is owned by DCC, was a close competitor for Total’s distribution business Total Butler and that the alternative oil supply options available to customers would not be cost effective if the businesses merged.
It said the level of competition in the market “would therefore be insufficient to prevent the merged firm from raising prices”.
OFT chief economist Amelia Fletcher, who was decision maker on the case, said a significant number of multiple site non-bulk customers were concerned by the deal.
“We consider that the Competition Commission should look in detail at the impact of the merger on these customers, as well as whether the merger may result in higher prices for customers buying oil products in specific local areas where the parties overlap,” she said.
The Competition Commission is expected to report its findings on the acquisition by September 18th.
DCC agreed to buy Total’s oil distribution assets in a deal worth €67 million in September.
The deal included trade, fixed assets and stock of transport, commercial and home heating oil distribution business Total Butler, the share capital of Total’s oil distribution and retail service station businesses on the Isle of Man and the Channel Islands, and contracts to supply transport fuels to about 300 dealer owned and operated retail service stations that are branded Total.
In a note this morning, Davy Stockbrokers said the delay in integration of GB Oils an Total Butler "postpones the realisation of synergies from the acquisition".
"We believe that the delay will reduce earnings in the 12 months to end March 2013 by €3 million. This represents 1.4 per cent of our forecast group EBITA for that fiscal year," it said.
Separately, the OFT has secured an agreement with Avanti Gas Limited, BP Gas, Calor Gas Ltd, Calor Gas Northern Ireland, Flogas UK Limited and DCC Energy Limited (trading as Flogas Northern Ireland) to make changes to their domestic bulk customer contracts.
The move is an attempt to improve transparency around switching and cancellation rights.
“The improvements to the terms and conditions for the supply of LPG and other relevant customer information will mean that customers can better understand how prices can change during this two year period, their switching and cancellation rights, and the associated exit costs,” the OFT said in a statement.
