Regulator blocks Pac Brands takeover

MELBOURNE - Australia's competition watchdog has opposed the proposed A$32.5 million ($34.9 million) purchase by Pacific Brands Group of foam-maker Joyce Corp, saying the merged group would kill competition.

Joyce shares slumped 12 per cent to 76Ac on the news.

The Australian Competition and Consumer Commission said although there are other foam makers in the market, Joyce is the only rival that can match Pacific Brands' Dunlop Foams in range, quality, location and speed of turnaround.

"Either an existing competitor or a new entrant to the industry would need to invest substantially and secure a sufficient customer base in order to compete at a level with Dunlop Foams and Joyce - and furthermore, to be in a position to constrain the merged entity," said commission chairman Graeme Samuel.

The commission also raised concern that with Joyce in its fold, Dunlop Foams would be able to offer cheap prices to Pacific Brands' Dunlop Bedding, as it would no longer have to fear losing rival customers to Joyce.

"With no significant competition constraint, the merged entity will have the ability and the incentive to give Dunlop Bedding a competitive advantage over other domestic bedding manufacturers."

Shares in Pacific Brands, which plunged 15 per cent over the past week after a disappointing first-half profit, rebounded 2.3 per cent to A$2.67 yesterday, giving it a market value of A$1.34 billion.

- REUTERS