GWA ACQUISITION HITS ROADBLOCK
Written on the 17 October 2014
THE proposed acquisition of a GWA Group Limited (ASX: GWA) business has raised concerns by the ACCC.
The consumer watchdog is questioning whether Rheem Australia’s proposed acquisition of its major competitor, the Dux hot water heater business, is anti-competitive.
“Dux is currently a major competitor to Rheem in the supply of storage water heaters and the proposed acquisition would lead to Rheem being the only Australian manufacturer of the more common vitreous enamel storage heaters,” says Sims.
“The ACCC is concerned that the proposed acquisition is likely to substantially lessen competition in the supply of storage water heaters.
“Market participants raised concerns that the proposed acquisition may enable Rheem to raise prices or decrease service or quality in the supply of electric and gas storage water heaters in Australia.
“Market inquiries have also indicated that there are few imports for the larger-size storage water heaters commonly used in Australian homes.”
The concern has come about due to the lack of availability of heaters in some regions and also the tendency to replace heaters with the same type.
Gas-powered continuous flow water heaters have increased in popularity in Australia but they aren’t viable for all consumers, such as those in areas where reticulated gas is unavailable.
Moreover, market inquiries indicate that system replacements currently make up around 70 to 80 per cent of sales because this is faster and cheaper.
The ACCC will invite further submissions until the end of this month and its final decision on the acquisition will be deferred until November 20.