ACCC to green light super paper merger
The ACCC is likely to give the go ahead to the merger of leading Australian paper merchants BJ Ball and K.W. Doggett because the new entity will be well short of market dominance, according to pulp and paper industry bible IndustryEdge.
“Combined, the new BJ Ball and Doggett will have a bit more than 40% of the market value by our estimation, with Spicers something less than 20%,” says IE managing director Tim Woods. “We don’t think the ACCC will be overly concerned about this merger, largely because the new entity will still be well short of market dominance.”
The remaining major players in Australia’s $1.1 billion paper market include Australian Paper, Domain Paper, Direct Paper Supplies and Vilensky Paper.
Japanese pulp & paper giant JP last week bought controlling interest in BJ Ball and KW Doggett and announced that the two businesses will combine. The new entity will become the largest paper, packaging and print media distributor across both Australia and New Zealand.
Woods believes the merger will lead to a reduction in warehouses and operating sites.
“Rationalisation of the merchants doesn’t come as any surprise and the fact that BJ Ball are leading the way with KW Doggett is no shock either, given how active BJ Ball has been in recent years. Once the dust settled on the commercial print mergers, it seemed likely the next step back upstream would be the subject of its own round of rationalisation.
“The international involvement, through JP, also makes sense. By any global measure though, it is declining, Australia is a mature, advanced and high value market. It is relatively predictable and because of that, its attractive compared with some other markets.
“Falling consumption of printing and communication papers mean value has to come from somewhere else,” says Woods. “What we see with this merger is an opportunity to reduce duplication of warehouses, operating sites and service to customers, as well as merging volume capacities.
“Much as occurred after PMP and IPMG announced they were joining forces, I expect to see further sector rationalisation, though where it will come from is less obvious than was the case with the printers. Combined, the new BJ Ball will have a bit more than 40% of the market value by our estimation, with Spicers something less than 20%. They will probably be looking for their next move right now and given how tough finding margin is in the sector, we would expect there to be at least a few interested parties.”
The transaction is subject to several conditions, including ACCC approval.