ACCC GIVES GO-AHEAD FOR IVE TO BUY OVATO

IVE will buy the Ovato heatset business, with the ACCC giving the green light to the $16m deal for its floored rival this morning.

Geoff Selig, executive chairman of IVE said, "It is expected the acquisition will complete within two weeks."

The ACCC concluded that the only options for Ovato were either acquisition by IVE or liquidation, as with no other bidders and the parlous state of its finances Ovato met the “failing firm” criteria, which enabled the ACCC to greenlight the deal that will see the vast majority of heatset capacity in Australia under the IVE banner.

Mick Keogh, deputy chair, ACCC said, "We reached the view that IVE was the only viable purchaser of Ovato, and that is if the deal did not go ahead the adminstrators would have to liquidate Ovato's assets."

The deal only includes the NSW and WA plants, and the Warwick Farm seven-web supersite will only be kept open for 18 months, to enable all work to be transitioned to IVE plants in Melbourne and Sydney. The WA plant at Bibra Lakes will be kept open long term.

The fate of the Geebung heatset plant in Brisbane looks bleak, as does the future for the sheetfed plants in Cairns and Auckland. None are part of the IVE deal. IVE has been spending the last 24 hours briefing Ovato staff on their future prospects.

The ACCC made good on its promise to run a "truncated" assessment, coming to its decision in record time, just a day after details of the deal were announced, and less than two weeks after the submissions deadline.

The ACCC considered that the proposed acquisition would combine the two largest suppliers of heatset web offset printing services in Australia. Post-acquisition, IVE would be the main supplier of these printing services. For some customers, IVE would likely be the only supplier who could meet their print volume and timeliness requirements. Market participants raised concerns that IVE could therefore increase prices and/or reduce service levels.

The ACCC took into account the circumstances of Ovato being in voluntary administration and closely considered whether Ovato is a ‘failing firm’ in accordance with the criteria outlined in the Merger Guidelines:

• the relevant firm is in imminent danger of failure and is unlikely to be successfully restructured without the merger;
• in the absence of the merger, the assets associated with the relevant firm, including its brands, will leave the industry; and
• the likely state of competition with the merger would not be substantially less than the likely state of competition after the target has exited and the target’s customers have moved their business to alternative sources of supply.

Detailed information available to the ACCC indicated that without the sale to IVE, there would be no other purchasers and the only alternative for Ovato’s administrators would be liquidation of the assets.

The ACCC considered that, following liquidation, there was not a real chance that Ovato’s heatset web offset printing assets will be used to compete in the Australian market, as it was highly likely that these assets would either be sold to overseas purchasers or sold for scrap, exiting the Australian market altogether.

The ACCC also noted several market participants’ concerns about the loss of heatset web offset printing capacity in Australia if Ovato and its assets were to exit the Australian market.

Therefore, the ACCC concluded that the proposed acquisition met the ‘failing firm’ criteria as outlined above, as there was no real chance that Ovato or its key heatset web offset printing assets would continuing operating in the market absent the proposed acquisition. As such, the ACCC found that the proposed acquisition is unlikely to substantially lessen competition.