The competition watchdog has raised concerns regarding Automotive Holdings Group’s $43 million sale of its Covs Parts business to GPC Asia Pacific, which already operates the Repco chain.
The Australian Competition and Consumer Commission released a statement of issues on the deal today, arguing that the sale would reduce market competitiveness and make it harder for new suppliers to enter the market.
ACCC chairman Rod Sims said the watchdog’s preliminary view was that the deal would raise competition concerns in the supply of automotive parts and accessories to trade customers in nine regional towns in Western Australia.
“Market feedback indicates that following the proposed acquisition, GPC would be either the only supplier of automotive parts to trade customers, or one of two suppliers in these towns,” Mr Sims said.
“The proposed acquisition would remove GPC’s closest competitor in these regional towns, increasing GPC’s ability and incentive to raise prices or decrease service levels to trade customers.
“The ACCC is also considering the likelihood of an automotive parts provider expanding its supply or entering into any of the local markets.”
GPC, which operates in WA through its 36 Repco stores and eight Ashdown-Ingram branches, will own Covs Parts’ 25 branch network in the state if the deal is successful.
“Covs Parts is the only other generalist automotive parts supplier of a scale and scope in regional Western Australia that matches GPC,” Mr Sims said.
“The ACCC is concerned that its removal could lead to significant competitive harm and loss of choice for trade customers.
“It could also make it more difficult for new suppliers to enter the market.”
The ACCC will make a final decision on the proposed acquisition by November 26.
When AHG announced the sale in July, it said settlement was expected in September.
In March last year, press reports caused AHG to reveal that it had been approached by Burson Group regarding the potential sale of Covs Parts.
However discussions with Burson never got past the exploratory stage, and in October last year AHG backed out of the deal.
AHG shares were 0.7 per cent higher to $4.05 each at 12:30pm.