The CMA has found that Kingspan’s anticipated purchase of Building Solutions raises competition concerns in the supply of specialist insulation panels, as it brings together two of the big three suppliers.
SIG agreed Kingspan’s £37.5m offer for its subsidiary, Building Solutions (National) Limited, in October 2019.
Kingspan is the leading provider in the UK of standard foam sandwich panels, which are commonly used as insulated cladding on commercial and industrial buildings. Kingspan already owns a number of businesses that supply these products in the UK, including Joris Ide. Building Solutions also sells a range of insulation and specialist construction products through a variety of businesses, including Steadmans, Trimform, Advanced Cladding and United Roofing Products.
Kingspan and Building Solutions are two of only three key suppliers of standard foam sandwich panels in the UK and would only face serious competition from one other UK-based supplier – Tata Steel – after the deal, the CMA said. Competition from suppliers of products imported from outside the UK and suppliers of other products sometimes used as insulated cladding is also very limited.
For these reasons, the Competition & Markets Authority’s phase on investigation found that the deal could leave building contractors with few alternative suppliers to choose from.
CMA senior director Colin Raftery said: “Foam sandwich panels are widely used in non-residential buildings across the UK, such as supermarket distribution centres, hospitals and police stations. Sales of foam sandwich panels in the UK amounted to about £200m 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.”
The CMA said that while it was conscious that the construction sector is expected to be heavily impacted by the coronavirus (Covid-19) pandemic and see a considerable slowdown of activity in the near term, these two suppliers are expected to remain important competitors in the longer term.
Kingspan and Building Solutions must now address the CMA’s concerns within five working days. If they are unable to do so, the deal will be referred for an in-depth phase two investigation.