ACCC gives green light to Ovato distribution deal

The ACCC will not oppose the proposed acquisition of Ovato Retail Distribution (ORD) by Are Media, which will see the former Gordon & Gotch business move into the hands of the country’s biggest magazine publisher.

The deal is now set to go through tomorrow, with Are Media paying $10m and taking on $22.5m of its debt. The New Zealand business is expected to go through at the end of next month, with Are paying $5m and the remaining $4.5m debt.

Are Media is Australia’s largest magazine publisher and publishes titles such as The Australian Women’s Weekly, New Idea and Gourmet Traveller. ORD is Australia’s largest distributor of magazines to retailers (including newsagents, supermarkets and convenience stores), and is a major shareholder of Ovato, with a 16.48 per cent stake in the business.

When gathering industry feedback, the ACCC was told that many magazine publishers consider that ORD is their only viable option for national distribution of time-sensitive publications to retailers.

“Our primary concern with this proposed acquisition was the potential impact on competing magazine publishers. Our investigation focused on whether, after the acquisition of ORD by Are Media, sales by rival magazine publishers would be adversely affected by not having access to competitive distribution services,” ACCC chair Rod Sims said.

“Consistent with the ACCC’s findings when it considered Bauer acquiring Pacific Magazines in 2020, circulation and revenue of most magazines continue to decline significantly, and many titles have closed over recent years.”

“Historical sales data showed that consumers that still buy magazines have a high level of loyalty to particular titles, meaning that very few consumers would switch to an Are Media publication if it favoured distribution of its own magazines over its rivals’ publications.”

The ACCC concluded that Are Media would have insufficient incentive to favour distribution of its own publications over those of other publishers.

The continuing decline in magazine circulation and high fixed costs in distribution means that Are Media will likely have a strong incentive to maximise the aggregate volume of magazines it distributes after it purchases ORD.

“We also note that Are Media is heavily reliant on ORD to distribute its magazines to retailers, and therefore has an interest in securing its distribution channel, particularly in an industry facing continuing decline.”

The ACCC also investigated concerns that Are Media could put rival publishers at a competitive disadvantage by accessing data about competing publishers’ sales in the ORD system.

“Given that similar market information is publicly available, we considered that any benefit from the data is unlikely to give Are Media a significant competitive advantage,” Sims said.

“We therefore concluded that the proposed acquisition is not likely to result in a substantial lessening of competition.”

For Ovato, the deal, and the $9m sale of its marketing services businesses to Hannan entity Ballygriffin, which goes through today,, leaves it concentrating virtually exclusively on print, as well as providing some much needed cash. For Are Media, it means the business is now fully vertically intergated, owning publish, print and distribution.