On 10 March 2016, US-based document management juggernaut, Iron Mountain Inc., submitted draft s87B undertakings to the ACCC in connection with its proposed buyout of rival storage and information management services company, Recall Holdings Limited.
The undertakings offered by Iron Mountain are principally intended to address concerns raised by the ACCC about the transaction (which involves combining two of the biggest document management players globally) in its Statement of Issues published on 5 November 2015.
According to the SOI, the information management industry in Australia provides services relating to the storage, protection, retrieval and disposal of physical (paper) and digital records. This can be broadly segmented across four lines concerning:
- physical document management services (the storage and retrieval of physical documents);
- digital document management services (scanning and electronically storing large numbers of physical records);
- data protection services (storage of backup or archival data); and
- secure destruction services (collecting, shredding and disposing of hard copy documents).
The ACCC’s most significant concerns relate to the supply of physical document management services in Australia, where both Recall and Iron Mountain have significant market shares (it is estimated that the merged entity, without any divestments, would result in a combined market share of 59-71%). The ACCC’s concerns reflect feedback obtained by the ACCC from market participants during its market inquiries.
More particularly, the ACCC is concerned that the transaction would be “likely to lead to a substantial lessening of competition in the national [physical document management services] market” and, to a lesser extent, in regional markets as well. This is because the transaction would result in the elimination of close and significant competition between Iron Mountain and Recall which may lead to an increase in prices and/or reduction in services. In other words, absent the proposed transaction, Iron Mountain and Recall would continue operating as independent businesses in Australia.
To address the ACCC’s concerns, Iron Mountain proposes to divest the majority of its existing Australian business, in particular, its physical document management services and digital document management services businesses (excluding operations exclusively relating to the Northern Territory). Iron Mountain proposes to retain its data protection services business in Australia.
It is not currently clear who might bid for Iron Mountain’s business but other industry participants include Grace Records Management and The Information Management Group (both suppliers of information management services in Australia with operations in every state and territory). Under the terms of the proposed undertaking, the eventual purchaser must be approved by the ACCC.
The ACCC has invited interested parties to comment on Iron Mountain’s proposed undertakings with the closing date for submissions being 21 March 2016. The ACCC is expected to decide on whether or not to accept Iron Mountain’s undertakings on 31 March 2016.
Since announcing its A$3.4 billion play for ASX-listed Recall in April 2015, Iron Mountain has been working closely with competition regulators in a number of other jurisdictions, including the United States Department of Justice, United Kingdom Competition and Markets Authority (the CMA has referred the proposed transaction for an in-depth investigation (phase 2)) and the Competition Bureau of Canada, in order to win approval to proceed with the deal. Subject to receiving relevant regulatory approvals, the transaction is expected to close in Q2 2016.