Competition concerns raised over THL's Apollo acquisition

Australia’s consumer watchdog has today outlined preliminary concerns that New Zealand-based tourism company Tourism Holdings’ (NZX: THL) acquisition of Apollo Tourism & Leisure (ASX: ATL) may be anti-competitive.

Specifically, the Australian Competition and Consumer Commission (ACCC) is concerned that the acquisition of Apollo would “remove THL’s closest and largest competitor for motorised RV rentals in Australia”.

Shares in Apollo have dived on the news, down 8.33 per cent to $0.44 per share at the time of writing.

Announced in December last year, the proposed merger values Apollo at $137 million and would give the Australian campervan and motorhome business a 25 per cent holding in the combined entity.

According to ACCC commissioner Stephen Ridgeway, market feedback indicates that THL and Apollo are “by far the two largest suppliers” in the motorised RV rentals market.

“Market feedback also indicates that other RV rental suppliers lack the scale to replace the competition lost by Apollo being acquired,” Ridgeway said.

“Furthermore, our inquiries have not identified that new entry or expansion by other RV suppliers is likely to provide a strong competitive constraint on a combined THL and Apollo.”

In addition, the ACCC says it is looking into the extent to which peer-to-peer caravan hire platforms like Camplify (ASX: CHL), Camptoo and Outdoorsy compete with traditional RV rental suppliers. If the deal goes, THL would secure a minority stake in Camplify via Apollo’s holding in the business.

“Our review to date has found that peer-to-peer platforms do not currently provide a strong constraint on traditional RV rental suppliers,” Ridgeway said.

“As a result of market feedback so far, we are concerned that consumers may end up paying more to rent RVs, or receive lower quality and service, as a result of the proposed acquisition.”

In response to the ACCC’s comments, Apollo released a short statement, saying it will “continue to work closely with the ACCC throughout the second phase of its enquiries and to address the issues identified”.

The competition watchdog is scheduled to release its final decision on the merger of Apollo and THL on 21 July 2022.