VANTAA, FINLAND — Finland's antitrust authority has moved to block a plan by two Finnish plastic pipe manufacturers Uponor and KWH Group to merge their pipe infrastructure businesses.
Last September, the two groups announced they intend to consolidate the operations of subsidiaries KWH Pipe Ltd and Uponor Infrastructure Solutions in a new joint venture called Uponor Infra Oy. They said the consolidation was prompted by intense competition and falling demand resulting from the prolonged global economic crisis.
The Finnish Competition and Consumer Authority (FCCA) has decided the merger should be prohibited. The body argued that it would bring together the country's "two overwhelmingly largest suppliers of plastic pipe systems", reducing competition significantly in the infrastructure pipe market.
FCCA said the move is likely to result in increased pipe prices and raise infrastructure building costs. It had little choice but to oppose the merger as the two companies had offered no proposal mitigating its effect on competition, the authority declared.
Under Finland's Competition legislation the FCCA decision must be referred to the Market Court, a special court that hears market law, competition and public procurement cases. The court can prohibit or approve the merger or impose conditions on its go-ahead.
Uponor and KWH groups stated that they would support their case at the Market Court and still intend to continue with the merger plan. The court has until 25 May 2013 to reach a decision in the case.
Under the plan, Uponor would own a majority 55.3 percent stake and KWH Group would have a 44.7 percent share in the joint venture which would focus on supplying infrastructure pipe systems mainly to northern Europe.
The firms' infrastructure businesses produce pipe used to convey rainwater, sewage, pressurised water and cable systems for construction and municipal authority customers.
The proposal would also see Uponor acquire the crosslinked polyethylene (PEX) pipe production operations of Ulvila-based KWH Pipe which would be integrated with Uponor's building solutions organization.
The partnership between Vaasa, Finland-based KWH and Uponor of Vantaa, Finland want to benefit from increased efficiency and economies of scale as a result of the merger.