The proposed $45 million sale of an AHG Ltd-owned vehicle parts and accessories business to the parent of Repco Australia has been put on hold while the Australian Competition and Consumer Commission (ACCC) seeks feedback from the market on concerns that the deal may create a parts monopoly in the Western Australian vehicle market.
WA-based Covs Parts, currently part of public company Automotive Holdings Group Ltd, is in the process of being sold to GPC Asia Pacific, the parent of Repco Australia, in a deal announced last July and which was to have been finalised in September. Covs has 25 branches in WA.
But the ACCC has chosen at this late stage to step in and ask for submissions regarding the potential market power of the Repco deal.
AHG is selling the business which it acquired from the Coventry Group in 2011 for what was regarded at the time as a bargain price.
AHG managing director Bronte Howson, whose career background was in auto parts, proceeded to turn the then 80-year-old Covs business around. But, in the process, he rolled the lucrative exclusive Ford and Holden WA genuine parts distribution operations into AHG’s in-house parts operation, AMCAP.
While AHG said it was putting Covs on the market as part of its divestment plan for assets that did not meet the group’s expected returns on the investment, AHG is also said to be conscious that, having removed the genuine parts business, Covs is a serious distributor of non-genuine car parts and this can prove to be at odds with AHG’s role as the holder of Australia’s largest portfolio of franchised dealerships – with which non-genuine parts sales are a major sore point.
AHG said the proposed sale of Covs left it with its multi-franchise parts outlet AMCAP, which was considerably bigger than Covs.
Repco is not the only company chasing Covs. Victorian-based vehicle parts company Burson Auto Parts – which has 121 outlets in most states, excluding Western Australia – has twice made a bid for Covs. The latest was around the same time as the offer came from GPC that was also seeking to expand its WA presence. Burson is believed to soon be opening two stores in WA.
Meanwhile, ACCC chairman Rod Sims said the commission’s concerns revolved around the supply of automotive parts and accessories to trade customers in nine regional towns in Western Australia.
“Market feedback indicates that following the proposed acquisition, GPC (Repco) would be either the only supplier of automotive parts to trade customers or one of two suppliers in these towns,” he said.
Mr Sims said that Covs Parts was the only other general automotive parts supplier of a scale and scope in regional WA that matches GPC.
“The ACCC is concerned that its removal could lead to significant competitive harm and loss of choice for trade customers. It could also make it more difficult for new suppliers to enter the market,” he said.
“The proposed acquisition would remove GPC’s closest competitor in these regional towns, increasing GPC’s ability and incentive to raise prices or decrease service levels to trade customers.
“The ACCC is also considering the likelihood of an automotive parts provider expanding its supply or entering into any of the local markets.”
GoAuto approached both AHG and GPC but both companies declined to comment.
After AHG’s purchase of Coventry’s automotive parts business, the name was changed to Covs Parts. Coventry continues as a supplier of industrial fasteners and fluid hydraulics.
GPC Asia Pacific, which is a subsidiary of US-based Genuine Parts Company, bought Repco Australia, Repco New Zealand, car electrical and thermal products importer AshdownIngram, motorcycle apparel retailer McLeod Accessories and specialist importer Motospecs in March 2013 for $800 million.
GPC Asia Pacific owns 36 Repco stores and eight Ashdown-Ingram branches. Its offer to AHG is for the Covs Parts stores in 16 locations in the Perth metropolitan area and in the towns of Albany, Bunbury, Busselton, Esperance, Geraldton, Kalgoorlie, Karratha, Mandurah and Port Hedland.
By Neil Dowling and John Mellor
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