The Morgan Crucible Company plc and Manville Corporation: A report on the merger situation

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On 18 December 1990 the Secretary of State for Trade and Industry asked us to investigate and report on the acquisition by The Morgan Crucible Company plc (Morgan) in June 1990 of certain businesses of Manville Corporation (Manville) (see Appendix 1.1). The acquired businesses include refractory ceramic fibre (RCF) businesses in Europe and the USA, as well as certain other refractory businesses.

Morgan is an international group, based in the United Kingdom, making a range of thermal ceramics, speciality chemicals, carbon products, technical ceramics and electronics products. Its total turnover in 1989 was £523 million and its turnover in RCF was £10 million. It is the second largest supplier to the United Kingdom of RCF. Manville is a US company with a total turnover in 1989 of US $2,192 million (£1,337 million) in building and process engineering products and components. The acquired businesses had a turnover of £65 million and were the fourth largest supplier to the United Kingdom of RCF, from production facilities in France.

The only product of which Morgan and the acquired businesses both enjoy a significant market share in the United Kingdom is RCF. This is a man-made mineral fibre, used as a high temperature insulating product in many industries. It is produced in two basic forms, bulk and blanket, and in each case the fibre can be made by either a blowing or a spinning process. As well as being required by users in these two basic forms, RCF is also made into what are known as converted products, such as vacuum formed shapes, boards, yarns and RCF paper.

So far as bulk and blanket are concerned, the effect of the merger is to reduce the number of significant suppliers of RCF to the United Kingdom market from four to three. Morgan's share increases from 22 per cent to 41 per cent in value terms (21 per cent to 37 per cent in volume terms). It remains the second largest supplier, behind The Carborundum Company Ltd (Carborundum), which has a 43 per cent share in value terms (50 per cent in volume terms). Carborundum and Morgan are the only United Kingdom manufacturers of RCF. The only other significant supplier to the United Kingdom is Kerlane, a subsidiary of Saint-Gobain SA of France.

Despite the increase in concentration, we believe that competition in the market for bulk and blanket is unlikely to be impaired, for the following reasons. Carborundum has recently almost doubled its United Kingdom capacity by adding a new spun RCF plant to its existing blown capacity. Once this new plant is fully operational, potential supply by the two United Kingdom manufacturers will be more than twice domestic demand. In this market there are informed buyers whose purchases of RCF are important to them and who can change source easily. The third largest supplier, Kerlane, has steadily increased its market share and is likely to remain a significant competitor. These factors taken together are likely to have an important constraining effect on prices in the United Kingdom. Moreover, most of the supply by the acquired businesses to the United Kingdom has been of blanket RCF made by the spinning process, to customers who prefer spun material. Morgan only used the blowing process and therefore was not in direct competition for supply of this product. As already noted, Carborundum also now has spun capacity in the United Kingdom. Imports from Manville of bulk RCF have been fairly small, partly because of transport costs. Finally, Carborundum has long been and still remains the largest supplier of bulk and blanket. The wider product range and other advantages resulting from the merger should enable Morgan to compete more effectively with Carborundum, both in the United Kingdom and more widely in the EC.

So far as converted products are concerned, the merger will lead to an increase in Morgan's market share from 14 per cent to 17 per cent in value terms, making it the second largest supplier, behind Foseco (FS) Ltd which has a 22 per cent share. There is one other large supplier (Carborundum), with a share of 16 per cent in value terms, and many smaller ones. The particular products supplied by the acquired businesses are, however, mostly of a specialised, low-priced board which Morgan did not produce and which is in competition with non-RCF board. In these circumstances, and having regard to the ease of entry into much of the market for converted products, we do not consider that the increase in Morgan's market share is of concern.

Since Carborundum and Morgan both make substantial amounts of converted products as well as being the main suppliers of bulk and blanket, a consequence of the merger is that other converters who wish to buy their bulk or blanket from a supplier which is not a major competitor will have lost one potential source of supply. Sales to converters are, however, important to both Morgan and Carborundum and, as already noted, entry into the converted products market is relatively easy. Taking into account the availability of RCF from distributors, as well as our conclusions on the competitiveness of the market for bulk and blanket, we believe it would be difficult for Morgan successfully to discriminate against converters, and we do not consider that the merger will impair competition in this market.

We have not identified any other issues which are likely, in our view, to give rise to adverse effects. We conclude, therefore, that the merger should not be disturbed.

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