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The Australian Competition and Consumer Commission has granted authorisation for the proposed merger of Armaguard and Prosegur, the country鈥檚 two largest cash-in-transit providers.
Under the Competition and Consumer Act, the ACCC may approve a merger only if it is satisfied that it will not 鈥渟ubstantially鈥 reduce competition in the sector, or if the benefit of the merger to the public outweighs the risk of consumer detriment.
During its , the ACCC found that Australia鈥檚 cash-in-transit sector is in 鈥渟tructural decline鈥 due to the decreased use of cash and the rise of digital payments, particularly since the COVID-19 pandemic.
However, the ACCC also found that cash is still 鈥渃rucial鈥 in certain areas of the economy, and these could be severely affected if access to cash was disrupted.
鈥淲ithout the proposed merger, it was highly probable either Armaguard or Prosegur would withdraw from the declining cash-in-transit market in the near future, and this exit could occur very quickly,鈥 said Liza Carver, ACCC commissioner.
鈥淲e were concerned that the rapid exit by either of these two major suppliers could cause significant disruption, including by reducing the availability of cash to their customers, and therefore the public.鈥
Both Armaguard and Prosegur provide cash transport, management and processing services, each of which are predominantly provided to banks, retailers and independent ATM operators.
The ACCC said that access to cash is particularly important in regional Australia, where older consumers rely on cash payments and poor internet access can limit electronic payment options.
鈥淭he ACCC concluded that the merger lessens some of the likely harms caused by the potential disorderly exit of one of the parties, and allows for a smoother transition to one provider, including by maintaining adequate access to cash,鈥 said Carver.
Court-enforceable undertaking
In addition to authorising the merger, the ACCC has accepted a court-enforceable undertaking that will be in effect for the next three years.
The undertaking imposes obligations on Armaguard-Prosegur to ensure continuation of services, reduce price volatility and make use of 鈥渆xcess equipment鈥.
鈥淭o comply with the undertaking, the combined Armaguard-Prosegur will be required to continue offering cash-in-transit services to all locations that are currently serviced,鈥 said Carver.
鈥淭he undertaking also limits its ability to reduce service levels and raise prices for existing customers and sets minimum terms and pricing constraints for new customers.鈥
Although the undertaking allows prices to be increased within limits over the next three years, this is against a backdrop of a declining industry with current loss-making prices, said the ACCC.
In the regulator鈥檚 view, the undertaking therefore balances the capacity for Armaguard-Prosegur to build a 鈥渇inancially viable business鈥 against the potential impact of the proposed merger on new and existing customers.
In addition, the undertaking contains a commitment to create registers of surplus sites, employees and equipment.
鈥淭he undertaking also includes commitments that cover services to ATM operators and is therefore likely to reduce the impact of the proposed merger on independent ATM operators,鈥 said Carver.
While the undertaking is in force, the ACCC will also consider whether further intervention from government is needed to regulate and maintain access to cash services.
Access to cash businesses under pressure
News of the merger comes at a difficult time for cash businesses globally, amid the financial restructuring of Diebold Nixdorf, the world鈥檚 largest ATM maker.
Last week, Diebold Nixdorf was delisted from the New York Stock Exchange (NYSE) after filing for bankruptcy.
In a , the NYSE said that Diebold Nixdorf stock was no longer 鈥渟uitable for listing鈥 after the company its Chapter 11 bankruptcy filing at a court in the Southern District of Texas.
All of Diebold Nixdorf鈥檚 outstanding common shares were cancelled, and holders of those shares would not receive 鈥渁ny recovery鈥, the NYSE said.
