Sheffield company's £37.5m sale of panel firm on hold over competition concerns
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SIG wants to offload insulated panel manufacturer, Building Solutions, to cut debt and focus on its core business.
But the Competition and Markets Authority (CMA) has raised concerns the deal could leave building contractors with too few suppliers.
Proposed buyer Kingspan is the biggest foam sandwich panel firm in the UK. The acquisition of £60m turnover Building Solutions would leave Tata Steel as its only serious competition in the UK, the CMA says.
Now the two firms must address its concerns within five working days or face an in-depth investigation.
While the coronavirus pandemic has heavily impacted the construction sector, the two suppliers are expected to remain important competitors in the longer-term, according to Colin Raftery, CMA senior director.
He added: “Sales of foam sandwich panels in the UK amounted to about £200 million last year, so they account for an important part of the construction costs faced by businesses and public bodies.
“Kingspan is by far the largest player in this market and this deal would involve it buying up one of its only two meaningful competitors. So, we’re concerned that the deal could damage competition, resulting in higher prices or lower quality products.”
Kingspan already has businesses that supply these products in the UK, including Joris Ide. Building Solutions sells insulation and specialist construction products through businesses including Steadmans, Trimform, Advanced Cladding and United Roofing Products.
SIG plc is Sheffield’s biggest company by turnover with £2.7bn in 2018.
It announced the sale of Building Solutions in October as part of a strategic review aimed at disposing of non-core businesses, focusing the group’s portfolio and strengthening its balance sheet.
It operates across 585 branches in the UK and Ireland, and mainland Europe. Its core markets are insulation and interiors, roofing and exteriors and air handling.
The company was founded by Ernest Adsetts in 1957. His son Norman joined the firm in 1966, becoming managing director in 1970, and then chairman in 1985.