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Concerns about Bis-Cougar mining equipment deal: ACCC

The Australian Competition & Consumer Commission (ACCC) has raised preliminary competition concerns about Bis Industries’ (Bis) proposed acquisition of Cougar Mining Group (Cougar).

Bis and Cougar both provide mining equipment hire services to the underground coal mining industry in New South Wales and Queensland, including the hire of longwall relocation equipment and run-of-mine equipment.

The ACCC has preliminary concerns about the supply of longwall relocation equipment hire services.

“Longwall coal mining is a method of underground coal mining,” the ACCC said in a statement. “Once all of the available coal along a coalface (or longwall) is mined, the longwall coal mining machinery needs to be moved and set up in a new location within the same mine.

“A number of mine operators have raised strong concerns that the proposed acquisition would reduce the number of significant suppliers of longwall relocation equipment hire from two to one,” said ACCC Chair, Rod Sims.

“In our opinion this would likely lead to higher prices and reduced quality of service,” he said.

The ACCC’s preliminary view is that the threat of new entry or expansion is unlikely to significantly constrain a combined Bis-Cougar.

“There appear to be high barriers for a company seeking to enter or expand into the supply of longwall relocation equipment hire, including high capital costs and long lead times in acquiring the equipment,” said Sims.

The ACCC also considers that self-supply of longwall relocation equipment by mine operators is unlikely to significantly constrain a combined Bis-Cougar.

“While some mine operators own some pieces of longwall relocation equipment, it doesn’t make commercial sense for most mine operators to own a full suite of longwall relocation equipment,” said Sims. “This is due to the high up-front purchasing costs, costs of maintaining the equipment, and the relative infrequency for the need for this equipment.”

The ACCC also examined the impact of the proposed acquisition in the supply of run-of-mine equipment hire services. The ACCC’s preliminary view is that the proposed acquisition is unlikely to raise competition concerns in this area.

The ACCC invites submissions from interested parties on the statement of issues by 23 August 2019. The ACCC’s final decision is scheduled for 24 October 2019.

Bis is an Australian unlisted public company. It provides equipment hire, haulage and logistics services to companies in the coal, iron ore, bauxite, nickel and gold mining industries.

Cougar is a privately owned company based in Newcastle, New South Wales. The services it provides to the underground coal mining industry in New South Wales and Queensland includes mining equipment hire (including longwall relocation equipment and run of mine equipment), workshop repairs, field maintenance services and spare parts services.

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