CMA to refer SIG's disposal to Kingspan for in-depth probe
The Competition and Markets Authority said on Tuesday that it could refer SIG’s disposal of its building solutions business to Kingspan for an in-depth investigation as it raises competition concerns in the supply of specialist insulation panels.
Building materials supplier SIG agreed last October to sell its building solutions segment to Kingspan for £37.5m.
The competition watchdog noted that Kingspan is the leading provider in the UK of standard foam sandwich panels, commonly used as insulated cladding on commercial and industrial buildings such as large waste facilities. The company already owns a number of businesses that supply these products in the UK, including Joris Ide.
SIG’s building solutions business also sells a range of insulation and specialist construction products through a variety of businesses, it said.
"Kingspan and Building Solutions are two of only three key suppliers of standard foam sandwich panels in the UK and would only face serious competition from one other UK-based supplier - Tata Steel - after the deal," the CMA said. "Competition from suppliers of products imported from outside the UK and suppliers of other products sometimes used as insulated cladding is also very limited."
As a result ,the CMA’s Phase 1 investigation found that the deal could leave the merging companies’ customers, usually building contractors, with few alternative suppliers to choose from.
The CMA’s senior director, Colin Raftery, said: "Foam sandwich panels are widely used in non-residential buildings across the UK, such as supermarket distribution centres, hospitals and police stations. Sales of foam sandwich panels in the UK amounted to about £200 million last year, so they account for an important part of the construction costs faced by businesses and public bodies.
"Kingspan is by far the largest player in this market and this deal would involve it buying up one of its only two meaningful competitors. So, we’re concerned that the deal could damage competition, resulting in higher prices or lower quality products."
Kingspan and SIG now have five working days to address the CMA’s concerns. If they are unable to do so, the deal will be referred for an in-depth Phase 2 investigation.