Glynwed International and J B & S Lees Ltd: A report on the merger situation

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On 16 November 1988 Glynwed International plc (Glynwed) acquired J B &S Lees Limited (Lees) from Quoteplan plc. On 24 April 1989 we were asked to investigate and report on the acquisition. The terms of reference are at Appendix 1.1. We were concerned primarily with the supply in the United Kingdom of hardened and tempered steel strip (H & T strip). This accounted for a small part of the total business of the companies concerned in the merger, representing 0.46 per cent of Glynwed’s turnover and 3.6 per cent of Lees’.

Most H & T strip is used to manufacture products such as saws, hand tools, blades, springs and valves. In 1988 the supply of H & T strip in the United Kingdom was worth £7.2 million. The largest suppliers in the United Kingdom are Glynwed (52.9 per cent of the market by value) and Lees (10.6 per cent). The combined exports of Glynwed and Lees exceed their United Kingdom sales. There are three other suppliers in the United Kingdom with some 22.7 per cent of the market by value between them. Imports account for 13.8 per cent by value. An alternative source of supply of H & T strip is provided by manufacturers of finished products doing their own hardening and tempering, or using subcontractors.

We examined four main issues affecting competition: the ability of customers themselves to harden and temper at the strip or the finished product stages; competition in H & T strip from other United Kingdom suppliers; imports of H & T strip; and competition (including imports) at the finished product stage.

We analysed the supply of H & T strip in the United Kingdom by reference to its end use. We found that sales estimated at £2.4 million in 1988 were not affected by the merger because there was little or no overlap between Glynwed’s and Lees’ business. In two other areas-band woodsaws and hand tools-with H & T strip sales estimated at £1,242,000 , there was a substantial increase in market share but also competition or potential competition from imports. In the remaining area, amounting to about £1.5 million of business, we had some concern because the merger increased the combined Glynwed/Lees share, in some cases to a very high level, with the possibility of monopolistic abuse. We believed, however, that the potential threat of price rises in this area could be mitigated by the existence and potential for increased imports of H & T strip and finished products, whether imported directly or through stockholders.

We concluded that the merger between Glynwed and Lees does not and may be expected not to operate against the public interest.

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