A blow for Downer EDI in its attempts to rationalise and bury its lingering Spotless takeover adventure.
Alsco Pty Ltd has withdrawn its request for informal clearance by the competition regulator, the ACCC to buy the Spotless Laundries’ garment laundering business (Spotless Garments).
Spotless Garments is part of Spotless Group Holdings Limited which is wholly-owned by Downer EDI. It seems the competition worries held by the ACCC were seen as too big to be overcome by Alsco.
Downer did not issue a comment after the ACCC released the statement.
Downer’s share price fell 2.44% to $4.80.
Alsco and Spotless Garments are major suppliers of hiring, cleaning, and delivery services for garments across Australia.
The ACCC began its informal merger review in June of this year and had expressed preliminary concerns about the transaction on October.
It took Alsco and its advisers two weeks to decide to withdraw. Alsco is owned by Alsco Inc., a company based in the United States
The ACCC’s preliminary view on October 8 was that the proposed acquisition would likely substantially lessen competition in the supply of commercial laundry services for garments in each Australian state, as well as in multi-state markets.
The ACCC’s investigation indicated that Alsco and Spotless Garments were the two largest garment laundry suppliers in most states, and the only two major suppliers offering garment laundering services across multiple states.
“We were concerned Alsco’s closest competitor in garments laundering would be removed, leaving garments customers with few comparable suppliers in terms of scale and geographic reach,” ACCC Commissioner Stephen Ridgeway said in a statement released on Thursday.
“Mergers between close competitors in already-concentrated markets will attract ACCC scrutiny.”
“During COVID-19, the ACCC remains focused on rigorously assessing proposed mergers to ensure Australia’s economic recovery is supported by competitive markets,” Mr. Ridgeway said.
The ACCC’s separate merger review into South Pacific Laundry’s proposed acquisition of Spotless Laundries is continuing.
For Downer, the decision to withdraw by Alsco leaves it with a headache, but that will only get worse if the South pacific purchase of Spotless Laundries doesn’t happen.
Downer wants the non-Laundry-related business of Spotless as it pushes away from contracting and train making and into services, such as infrastructure, government assets, and sports stadia and the like.