The UK’s Competition and Markets Authority (CMA) said on Tuesday it has referred Menzies Aviation’s purchase of de-icing and ground handling specialist Airline Services for an in-depth merger investigation.
The CMA said Menzies “has chosen not to offer proposals” to address the CMA’s competition concerns.
Last month, Edinburgh-based John Menzies plc agreed to sell Menzies Distribution, its print media division, to become a “pure play” aviation services group.
The news from the CMA came as John Menzies plc said its group underlying profit before tax rose 15% to £28.5 million and Menzies Aviation underlying operating profit rose 9% to £23.7 million in the six months to June 30.
The group’s turnover, adding back that of the discontinued Distribution segment, rose to £1.24 billion from £1.21 billion at the same stage of 2017.
John Menzies plc CEO designate Forsyth Black said: “I am very pleased to have concluded our strategic realignment that, subject to shareholder approval, will see the creation of John Menzies plc as a global pure play aviation business and allow us to focus our management and capital resources on expanding our position in the structurally growing aviation services market.
“We hold a strong position in a growing marketplace and our aim is to build on this by continuing to pursue our established strategy, by continuing to invest in our technologies and most importantly to invest in our people in order to drive growth.”
Explaining its decision, the CMA said: “Last week, the Competition and Markets Authority (CMA) said that it would refer the deal for an in-depth (phase 2) investigation unless Menzies offered acceptable solutions to address its competition concerns.
“Both companies supply UK airlines and airports with support services, including the de-icing of aircraft engines and wings; ground handling (including passenger, ramp, baggage and airside cargo handling); and the cleaning and maintenance of aircraft interiors.
“Following its initial (phase 1) investigation, the CMA identified competition concerns regarding de-icing services at Edinburgh, Glasgow and London Heathrow airports, and ground handling services at London Gatwick and Manchester airports.
“As Menzies and Airline Services are close competitors at these airports, the deal could result in less choice for airlines operating there, potentially leading to higher prices and lower quality services.
“Menzies has chosen not to offer proposals to address the CMA’s concerns and so the merger will now be referred for an in-depth investigation by an independent group of CMA panel members.
“The deadline for the final decision is 28 January 2019.”