Yale & Valor plc and Myson Group plc: A report
on the proposed merger
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Summary
On 30 August 1989 we were asked to investigate and report on the bid
by Yale & Valor plc (Yale & Valor) to acquire Myson Group plc
(Myson) (see Appendix 1). On the same day we were requested to inquire
into a proposal by Blue Circle Industries plc to purchase Myson; the outcome
of that investigation is the subject of a separate report also completed
today.
Yale & Valor makes locks and other security equipment, gas and electrical
appliances including gas fires, and kitchen and catering equipment. The
main products of Myson are gas fires, water heaters, and domestic boilers,
as well as other central heating equipment, electric tumble driers, and
industrial and commercial heating and air conditioning equipment.
Yale & Valor and Myson thus overlap in the production and marketing
of domestic gas fires. In the case of both companies this is only a relatively
small part of the business-8 per cent of turnover for Yale & Valor
and 5 per cent for Myson.
We concluded that it is sensible to treat gas fires as a distinct market;
whilst other forms of heating and especially electric fires are evidently
substitutes for gas fires, we considered that a gas fire will have sufficient
distinguishing characteristics in the eyes of the consumer to place it
in a separate market.
We noted that a merged group would have about 35 per cent of the gas
fire market. Such a share would make a merged group the clear market leader;
of Yale & Valor's and Myson's competitors none has a market share
in excess of 15 per cent. Moreover, there is no reason to expect a growth
in imports of traditional gas fires.
Nonetheless, we do not think that a merger would enable the new group
to exploit its size to dominate the market. The chief reason for this
conclusion is the position in the market of British Gas. A very high proportion-about
three-quarters-of traditional gas fires is sold through British Gas, and
it is in the strong interest of British Gas both as a retailer and as
the sole supplier of the fuel to purchase gas fires on the most favourable
terms. In addition, there do not appear to be any significant barriers
to entry into gas fire manufacture, and three of the main competitors
of the merged group are subsidiaries of major British companies. Finally,
in recent years the decorative flame effect fire has expanded at the expense
of the traditional fire, and the decision by British Gas to market such
fires will no doubt encourage this trade. Yale & Valor and Myson have
not so far been active in this market but intend to become so.
A merger would also result in Yale & Valor obtaining a 13 per cent
stake in the central heating market. We think that this could have a beneficial
effect on competition in that market.
We do not think that a merger would have major adverse consequences
for employment. We do not expect there would be significant effects on
research and development.
We conclude unanimously that a merger between Yale & Valor and Myson
may be expected not to operate against the public interest.
Full text
Contents
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Chapters
|
|
| Chapter
1 |
Summary |
| Chapter
2 |
The companies involved and the merger situation |
| Chapter
3 |
The market for gas fires |
| Chapter
4 |
Views of the main parties |
| Chapter
5 |
Views of other parties |
| Chapter
6 |
Conclusions |
| |
List of signatories |
| Glossary |
|
| List |
Gas fire manufacturers, subsidiaries/operating divisions
and brand names referred to in he report |
Appendices
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|
| (The numbering of the appendices indicates
the chapters to which they relate) |
| 1 |
The reference |
| 2.1 |
Summarised results of Yale & Valor |
| 2.2 |
Myson: summarised balance sheets and summarised profit
and loss |
| 3 |
Survey of distributors |
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