MiTeK Industries Inc and Gang-Nail Systems Inc
A report on the proposed merger
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Summary
On 5 April 1988, the Secretary of State for Trade and Industry
requested the Commission (see Appendix 1.1) to investigate
and report on the acquisition of Gang-Nail Systems Inc (GNS
Inc) by MiTek Industries Inc (MiTek), two United States companies
which together with their subsidiaries supply punched metal
connector plates and related machinery in many countries.
One result of this acquisition was that MiTek had become the
owner of Gang-Nail Systems Ltd (Gang-Nail) in addition to
Hydro-Air International (UK) Ltd (Hydro-Air), both operators
in the United Kingdom. The Commission's concern is with the
effects of the merger of these two United Kingdom plate suppliers.
The Commission unanimously conclude that the merger may be
expected to operate against the public interest.
The detailed reasoning behind this decision is set out in
Chapter 6. Connector plates join together pre-cut lengths
of timber to form roof trusses which are used in the construction
of over 80 per cent of domestic roofs and an increasing proportion
of other roofs in the United Kingdom. With the plates, manufacturers
also supply the companies which fabricate the trusses with
computer programs to design the trusses, and with the machinery
to manufacture them. The products and
services supplied by the plate manufacturers are therefore
crucial to the operations of the 140 or so truss fabricating
companies. Hydro-Air and Gang-Nail together account for some
76 per cent of sales of punched metal connector plates and
related machinery in the United Kingdom.
Prior to the merger, competition between Hydro-Air and Gang-Nail,
the market leaders, was strong, to the benefit of the truss
fabricators. We do not believe that competition from the remaining
two competitors could be as effective as that between Hydro-Air
and Gang-Nail prior to the merger. Although some new firms
may seek to enter the market, we do not expect this to be
on a sufficient scale to compensate for the loss of competition
between the two previous market
leaders.
In this small, specialised market, the choice of available
fabrication systems, the incentive to maintain the development
of products and services, price and standards of service all
depend critically on healthy and active competition between
market leaders. We do not expect sufficient competition of
that kind to survive the merger. This adverse effect on competition
may be expected to operate against the public interest.
We have considered a number of alternative remedies, but believe
that divestment of Gang-Nail is the only remedy that would
maintain competition in this market. We therefore recommend
that MiTek should divest itself of Gang- Nail Systems Ltd.
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