Full inquiry into Grafton, Heiton deal

The Competition Authority has decided to conduct a phase two, or full-scale, inquiry into the proposed acquisition by Grafton Group plc of Heiton Group plc.

The authority now has until February 17th, 2005 to decide whether the acquisition would "substantially lessen competition" in the markets in which the two plcs operate.

A phase one examination that began in September was unable to conclude that the transaction would not substantially lessen competition, the authority said yesterday.

"The investigation of the proposed acquisition will examine the effect of competition in the provision of retail DIY and builders merchanting services," the authority said. The inquiry could conclude prior to February 17th.

Grafton has made a €36 million takeover offer for Heiton, a transaction which would see the combined operation having a 16.5 per cent share of the DIY sector.

Heitons runs the Atlantic Homecare DIY chain, while Grafton runs the Woodies chain.

There has been speculation that Grafton would be forced to dispose of or close down a number of Heiton's DIY outlets in order to win approval from the authority for the acquisition.

Analysts have speculated that the Grafton board might accept radical changes to the DIY retailing element of the merger, as the key attraction in the deal is the synergies that could be achieved in the building materials side of the business.

It is the fourth such phase two inquiry that the Competition Authority has carried out. Most recently, the authority blocked IBM's acquisition of Schlumberger, a business services group, saying it would lessen competition in the marketplace. This followed a phase two investigation.