The Commerce Commission has granted clearance for Evergreen NZ Holdings to acquire 100% of the shares in ACM New Zealand Limited from ACM Holdings (NZ) Limited.
In reaching its decision, the Commission considered the potential impact of the proposed acquisition on competition in national markets for the supply of wholesale cash-in-transit services, retail cash-in-transit services, ATM maintenance services and precious cargo services. Ultimately, our assessment of the proposed acquisition focused on the supply of cash-in-transit services.
Chair Dr John Small said the Commission was satisfied that the acquisition is unlikely to substantially lessen competition in any New Zealand market.
"After careful consideration of all of the relevant factors, the Commission is satisfied that the proposed acquisition is unlikely to substantially lessen competition when compared to the situation if the proposed acquisition did not proceed".
Central to the Commission's decision was its assessment of competition in the wholesale and retail cash-in-transit services markets absent the proposed acquisition, and the competition that would be lost with the proposed acquisition. This took into account information provided by Evergreen in its application, revealing that it is very likely that either Evergreen or ACM would cease to operate in the near future, resulting in a single national provider of wholesale cash-in-transit services regardless of whether the proposed acquisition proceeds.
"As noted in Evergreen's application, the relevant businesses of both Evergreen and ACM have suffered significant cash losses. An ongoing decline in the use of cash and reduced demand for cash-in-transit services – accelerated during the COVID-19 pandemic, and the rationalisation of bank branches – coupled with inflationary increases in costs makes it difficult for two national wholesale cash-in-transit providers to be financially viable. Without the proposed acquisition, we consider that it is unlikely that both Evergreen and ACM would continue to provide cash-in-transit services in New Zealand."
"ACM is projected to continue to suffer losses and we consider that ACM would likely exit the relevant markets in the short term.
"Given this, we are satisfied that there would not be a substantial loss of competition or material impact on the price and/or the quality of cash-in-transit services with the proposed acquisition.
"While not a relevant consideration to our decision to grant clearance for the proposed acquisition, we also considered that there were would likely be public benefits to the proposed acquisition. These include the ongoing stable supply of cash-in-transit services to the market and the orderly transition from two cash-in-transit providers to one, outcomes unlikely to be realised without this acquisition."
A public version of the written reasons for the decision will be available on the Commission's case register in due course.
Background
We will give clearance to a proposed merger if we are satisfied that the merger is unlikely to have the effect of substantially lessening competition in a market.
Both Evergreen (through its wholly owned subsidiary, Armourguard Security) and ACM (which is currently part of the Linfox Armaguard Group) provide cash-in-transit services and precious cargo services throughout New Zealand. Cash-in-transit services include the transport, management and processing of bulk cash for banks, the public sector, financial institutions and retail customers, as well as the replenishment of ATMs and bulk cash storage and management. Precious cargo services involve the secure storage and transport of precious or high value cargo such as foreign currency, bullion and other valuables. In addition to its cash-in-transit business, Armourguard Security also provides manned guarding and patrol services.
Evergreen applied to the Commission for clearance or authorisation of the proposed acquisition.
Evergreen's application meant that there has been a two-step process to our assessment of the proposed acquisition.
We first assessed whether the proposed acquisition would be likely to substantially lessen competition in a market. In doing so, we assess whether an acquisition is likely to substantially lessen competition in a market by comparing the likely state of competition if an acquisition proceeds, with the likely state of competition if it does not. If we are satisfied that an acquisition is not likely to substantially lessen competition, then we can clear an acquisition.
If we were not satisfied that an acquisition is unlikely to substantially lessen competition, then the second step would have seen us apply a 'public benefit test' to determine whether the proposed acquisition should be authorised. The public benefit test involves balancing the public benefits and detriments that would, or would be likely to, result from an acquisition. If we are satisfied that an acquisition will result in such a benefit to the public that it should be permitted, then we will grant authorisation.
