Competition Bureau statement regarding Samuel, Son & Co. Limited's acquisition of Wilkinson Steel and Metals Inc.

OTTAWA, May 2, 2013 — This statement summarizes the approach taken by the Competition Bureau in its review of the proposed acquisition by Samuel, Son & Co. Limited (Samuel) of Wilkinson Steel and Metals Inc. (Wilkinson), which was announced on March 28, 2013.

On April 25, 2013, the Bureau issued a No Action Letter (NAL) to Samuel and Wilkinson indicating that the Commissioner of Competition does not, at this time, intend to make an application under section 92 of the Competition Act in respect of the proposed transaction.Footnote 1

In conducting its review of the proposed transaction, the Bureau obtained information from Samuel and Wilkinson, as well as information from a large number of market participants, including competitors and customers.

Samuel and Wilkinson process and distribute a wide range of steel and specialty metals, such as stainless steel and aluminum, through service centres located throughout North America. Samuel operates in all regions of Canada while Wilkinson's business is primarily restricted to Western Canada.

In areas where Samuel and Wilkinson overlap in the straight resale of products purchased from steel mills, the Bureau quickly determined that the proposed transaction was not likely to lead to any substantial lessening or prevention of competition. The Bureau's review then focused on the processing services offered by both parties and the sale of those processed products to customers. With respect to these relevant products, although the Bureau determined that barriers to entry for a new competitor were significant, it concluded that barriers to expansion were not high and that sufficient remaining competition would exist post-transaction for the Bureau to conclude that the proposed transaction was not likely to lead to a substantial lessening or prevention of competition.

Background:

On March 28, 2013, the parties announced that they had entered into an agreement whereby Samuel would acquire Wilkinson. Both companies operate steel service centres in Canada where steel and specialty metals are sold and processed. Samuel operates 23 steel service centres in Canada, eight of which are located in Western Canada. Wilkinson operates 11 service centres, all located in Western Canada.

The Bureau identified three relevant product segments during its review: steel plate, flat rolled carbon steel and specialty metals (aluminum and stainless steel). For each of the three product segments, the overlapping business activities of the parties can be separated into two categories:

  • resale and distribution of unprocessed steel produced by steel mills; and
  • processing of that product into value-added products and the sale of these value-added products to customers.

With respect to the resale and distribution of the unprocessed products, the Bureau was able to conclude early during its review that the proposed transaction was unlikely to lead to a substantial lessening or prevention of competition. This finding was due to the fact that Samuel and Wilkinson are resellers of these unprocessed metals and that Samuel would continue to face direct competition from steel mills and other wholesalers.

The Bureau's review therefore focused on the value-added services and sales provided at the parties' service centres. In addition to the direct sale of unprocessed metals, these service centres provide custom cutting and shaping services based on customer specifications, such as cut-to-length, slitting services that cut steel and specialty metals into narrow strips, and plasma burning services to precision cut steel plates. Steel mills and other wholesalers do not generally offer these types of services; therefore, there are fewer competitors to the merging parties offering these specific products than for the simple sale of unprocessed metals.

With respect to the geographic scope associated with these segments, the Bureau found that the market was likely Western Canada for value-added steel products and likely all of Canada for value-added specialty metals due to their higher value/weight ratio.

The Bureau also found that:

  • a number of effective competitors would remain in the relevant segments following the merger;
  • there existed excess capacity in the industry; and
  • barriers to expansion for competitors were likely not high.

As a result the Bureau was able to conclude that the proposed transaction was unlikely to lead to a substantial lessening or prevention of competition in any market.

The Competition Bureau, as an independent law enforcement agency, ensures that Canadian businesses and consumers prosper in a competitive and innovative marketplace.

This publication is not a legal document. The Bureau’s findings, as reflected in this Position Statement, are not findings of fact or law that have been tested before a tribunal or court. Further, the contents of this Position Statement do not indicate findings of unlawful conduct by any party.

However, in an effort to further enhance its communication and transparency with stakeholders, the Bureau may publicly communicate the results of certain investigations, inquiries and merger reviews by way of a Position Statement. In the case of a merger review, Position Statements briefly describe the Bureau's analysis of a particular proposed transaction and summarize its main findings. The Bureau also publishes Position Statements summarizing the results of certain investigations, inquiries and reviews conducted under the Competition Act. Readers should exercise caution in interpreting the Bureau’s assessment. Enforcement decisions are made on a case‑by‑case basis and the conclusions discussed in the Position Statement are specific to the present matter and are not binding on the Commissioner of Competition.


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