ACCC approves acquisition of Esanda by Macquarie

Australian Competition and Consumer Commission on Thursday approved the proposal of Macquarie Group Limited to acquire Esanda Dealer Finance business of the Australia and New Zealand banking group. It concluded that the acquisition will not pose any substantial threat to the competition in the market for motor vehicle finance.

“The ACCC had some concerns that the proposed acquisition may lead to increased bailment interest rates (or lower commissions to dealers on POS finance), particularly for dealerships that do not have access to an aligned or in-house finance provider,” ACCC Chairman Rod Sims said.

The bailment finance helps motor vehicle dealership finance the cars displayed in their showrooms. Point-of-sales or POS finance facilities are also acquired by the dealerships to help their customers finance their purchases and earn commissions on individual contracts.

He also pointed out that existing and potential competitive constraints would further lessen the possibility of competition due to the acquisition. “The merged entity will face competition from Westpac/St George and manufacturer-aligned financiers as well as the possibility of new entry, and pressure from vehicle manufacturers (OEMs) to ensure that their dealers’ finance offers remain competitive with those of other dealers,” Sims noted.

Both the companies, Macquarie and Esanda, provide motor vehicle finance to consumers and dealerships across Australia. And the Esanda unit has the potentiality to fetch around AU$1.5 billion.

The auction is being run by Deutsche Bank, and the value of the assets being put up for sale is roughly AU$8.3 billion.

“The ACCC also noted that if the merged entity were to increase bailment rates and/or decrease POS commissions, this would provide an incentive for other providers, including manufacturer aligned financiers such as Toyota Finance and Nissan Finance, to begin to compete for the business of unaffiliated dealerships,” Mr Sims said.

The ACCC also noted that the competition in the car retailing sector would also impose further indirect constraint over the merger.

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