A proposed merger of Australia's largest printing businesses is in doubt after the competition watchdog flagged concerns about its impact on competition among magazine and catalogue printers.
PMP, which prints and distributes magazines and catalogues, plans to merge with the Hannan-family controlled IPMG, a magazine and catalogue printer, in a deal worth $119 million.
But the Australian Competition and Consumer Commission's preliminary view is that the merger may "substantially lessen competition" in the supply of heatset web offset printing, the main method for printing catalogues and magazines.
"The ACCC is concerned that as the two largest suppliers in heatset printing, the merger of PMP and IPMG may see a reduction in competition, with the number of significant suppliers in the market going from three to two," ACCC chairman Rod Sims said.
The other major player is IVE, which recently expanded through an acquisition of two other printing businesses.
Shares in PMP initially slumped more than 20 per cent on the ACCC's views, and recovered some ground to close at 71.5 cents, down nine cents, or 11.2 per cent.
PMP and IPMG announced their merger plans in October, under which PMP would acquire IPMG's business by issuing PMP shares at 63.5 cents a share.
Post merger, the Hannan family would own 37 per cent of the combined business. The combination would deliver annual cost savings of $40 million a year, which the companies say will help them remain competitive in a declining printing market.
The two companies hold around 75 per cent of the market share between them.
The competition watchdog knocked back a previous merger attempt in 2001, saying the deal would give the combined business too much market power.
The ACCC is also concerned the merger could foreclose rival catalogue distributors, particularly as the new business could offer customers a bundled print and distribution arrangement, Mr Sims said.
The regulator is seeking submissions from industry participants by the end of January 2017, and anticipates a final decision on the merger on February 23.
