New Zealand’s Commerce Commission has cleared the way for Evergreen NZ Holdings to acquire 100% of the shares of ACM New Zealand. Evergreen already owns Armourguard, the country’s dominant supplier of CIT and related service, and the acquisition of ACM from its parent Linfox Armaguard will create a monopoly.
In clearing the acquisition, the Commerce Commission accepted that it is very likely that either Armourguard or ACM would cease to operate in the near future, resulting in a single national provider of wholesale cash-in-transit services, along with retail CIT, ATM maintenance, and precious cargo services.
In Evergreen’s application, it noted that the relevant businesses of both Evergreen and ACM have suffered significant cash losses.
‘An ongoing decline in the use of cash and reduced demand for cash-in- transit services – accelerated during the COVID-19 pandemic, and the rationalisation of bank branches – coupled with inflationary increases in costs makes it difficult for two national wholesale cashin-transit providers to be financially viable’, it said.
Given the likelihood that ACM in particular was likely to exit the market, the Commission said it was satisfied that there wouldn’t be a substantial loss of competition or material impact on the price and/or the quality of cash-in-transit services with the proposed acquisition.
‘While not a relevant consideration to our decision to grant clearance for the proposed acquisition, we also considered that there would likely be public benefits to the proposed acquisition. These include the ongoing stable supply of cash-in- transit services to the market and the orderly transition from two cash-in-transit providers to one, outcomes unlikely to be realised without this acquisition’, it concluded.
According to Evergreen, both organisations’ CIT assets, liabilities, employees and operations will be merged into a newly formed and wholly owned subsidiary called Armourguard Logistics Ltd.
‘The new entity will continue to be managed locally leveraging Armourguard’s 85 years of New Zealand security knowledge, expertise, and CIT experience. We will continue to provide the same great level of service with the added strength of the combined knowledge and expertise of both Armourguard and ACM,’ it said.
‘It will be business as usual as we seek to complete the transaction in February / March 2025’.
Without wanting to rain on their parade, one doesn’t have to look too far to see how the best of intentions can come unstuck.
Much the same happened in Australia last year, when Armaguard acquired Prosegur, creating a near monopoly in wholesale CIT, with 90% of the market.
The same reason was given by the Australian Competition and Consumer Commission for clearing the acquisition – namely, it would avoid the probability of one or other of them shutting down and leaving businesses stranded. The merger was approved on the condition that Armaguard continue to transport cash to all the locations that had previously been served by both companies and not hike up prices.
But within months of the merger, Armaguard advised that its wholesale cash-in-transit business was unsustainable and unless it received a bailout, it would be unable to continue operations.
The continuing decline in cash usage was blamed.
Following months of emergency talks between Armaguard, its customers, the Reserve Bank of Australia, and the Federal Treasury Department, a rescue package of $50 million was agreed. This is being paid by Armaguard’s eight largest customers (including the four Australian retail banks), subject to certain conditions, over the course of a year to keep cash circulating while longer-term solutions for sustainable access to cash are sought.
