CC grants clearance for Knauf and USG to merge

Commerce Commission grants clearance for Knauf and USG to merge subject to a divestment

The Commerce Commission has granted clearance for Gebr. Knauf KG and USG Corporation to merge subject to a divestment undertaking.

USG is active in New Zealand through its 50% interest in USG Boral Building Products. The undertaking requires Knauf to divest USG’s interest in USG Boral, either entirely or just in Australasia, to a buyer approved by the Commission. If divestment of that interest is not achieved within a certain period, Knauf has agreed to divest certain other assets.

In December 2018, Knauf and USG jointly sought clearance to merge as part of an international transaction.

In reaching its decision, the Commission focussed on the impact of the merger in the national market for the manufacture/importation and wholesale supply of modular suspended ceiling systems. The Commission considers that the divestment will ensure continued competition for the products that the parties supply, and therefore that the merger is unlikely to result in a substantial lessening of competition.

As part of its investigation, the Commission cooperated with a number of other competition agencies including the Australian Competition and Consumer Commission.

A public version of the written reasons for the decision will be available on the Commission’s case register in the near future.

Background
When considering a proposed merger, the Commission must determine whether any competition that would be lost with the merger would be substantial. Where a merger is likely to substantially lessen competition in a market, the acquiring company may undertake to divest certain assets.

If we consider the proposed divestment undertaking will remedy the likely substantial lessening of competition, we will clear the merger. For a divestment undertaking to remedy competition concerns, we must be satisfied that the divestment will result in sufficient additional competitive constraint on the merged firm so that a substantial lessening of competition is no longer likely.

In addition to its proposed merger with USG, Knauf is in the process of acquiring the EMEA (Europe, Middle East and Africa) and APAC (Asia-Pacific) businesses of Armstrong World Industries, Inc. The Commission has factored this acquisition into its consideration of the merger.

Further information explaining how the Commission assesses a merger application is available on our website.

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