Dental chains will shed practices to merge

Two dental companies at the centre of a merger plan have offered to sell practices and abandon NHS contracts in order to allay concerns raised by the Office of Fair Trading (OFT).

The OFT is currently considering these undertakings offered by Bolton’s Integrated Dental Holdings (IDH) and Surrey-based Associated Dental Practices (ADP) in relation to their merger in lieu of a reference to the Competition Commission.

It was announced in January that IDH was to be bought in a reported £450 million deal by global asset manager The Carlyle Group.

IDH currently operates over 320 dental practices while ADP operates over 130.

The joint venture between The Carlyle Group (previously unconnected with either party) and Palamon Capital Partners LP (the previous owner of ADP) brings together IDH and ADP under single ownership.

After a merger investigation, the OFT considered a merger of the two dental practice operators would lead to a realistic prospect of a substantial lessening of competition in nine local areas in England.

The OFT found that the parties compete against each other in some locations for patients in order to fulfil their NHS treatment quotas.

While many aspects of NHS dentistry are regulated, the OFT is concerned that the merger could lead to a lessening of competition on some non-price factors such as convenience for patients.

Amelia Fletcher, chief economist at the OFT, said: ‘The evidence in this case suggests that dental practices offering NHS treatments do compete and that patients value the quality of care they receive as well as convenience factors, such as opening times.

‘We are concerned that the joint venture would allow IDH and ADP to reduce the quality of their offering in some locations. We are therefore pleased that the parties have offered to divest their practices and NHS contracts in the areas of concern, which we believe would restore competition to pre-merger levels while not affecting the large bulk of the deal.’

The OFT is required to consult publicly on draft provisional undertakings in lieu prior to taking any decision to accept such undertakings.

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