Competition body says Grafton’s sale of merchanting business to Huws Gray may reduce competition

2 December 2021

The Competition and Markets Authority (CMA) has announced that the sale of Grafton Group’s traditional merchanting business to Huws Gray may result in a substantial lessening of competition in one particular geographic area.

Huws Gray announced in July that it had agreed to acquire the traditional merchant business of Grafton Group plc – including Buildbase and The Timber Group (Beaumont / Brewer / L&G) for £520m.

“The CMA has arrived at this decision under its fast-track procedure at the request of the merging parties who accepted that the merger gives rise to a realistic prospect of a substantial lessening of competition in one local area where both merging parties supply building materials through general builders’ merchants,” a CMA statement read.

“In most merger cases, the CMA needs to carry out a longer Phase 1 investigation to determine whether it should clear a merger or refer it to a Phase 2 investigation. In line with the CMA’s guidance, however, merging companies can ask the CMA to fast-track the case to Phase 1 remedies discussions where it is clear from an early stage that there are competition concerns that can be addressed by clear-cut remedies. 

“This merger will, however, be referred for a Phase 2 investigation unless the merging parties offer acceptable undertakings to address these competition concerns.”

A statement from Grafton Group said the company was considering whether to accept an undertaking in lieu of a Phase 2 reference.

“The divestment is expected to close by 28 February 2022 and completion is not conditional on the outcome of the CMA process,” it said.

The CMA launched its merger inquiry on October 8. The takeover deal also includes Grafton businesses: Civils & Lintels, PDM Buildbase, Bathroom Distribution Group, Frontline and NDI brands.

The decision for Grafton to divest these businesses followed a comprehensive strategic review of the business which concluded that exiting this segment of the building materials distribution market in Great Britain would enable the Group to optimise shareholder value.