ACCC deals blow to NSW plans to sell Pillar Administration

The ACCC has indicated it could block any sale of state-owned super fund business Pillar to frontrunning suitor Link.

Perceived Pillar frontrunner Link is headed by John McMurtrie. Pic: John Feder

The New South Wales government has suffered a blow in its push to sell state-owned funds administrator Pillar Administration, as regulatory risks heighten on arguably the most likely buyer.

In a statement of issues released this morning, the Australian Competition and Consumer Commission indicated it could block any proposed purchase from perceived auction frontrunner Link Administration.

The ASX-listed Link (LNK) outlined its interest in Pillar in August, sparking the ACCC probe.

It has since confirmed this morning the development of an acquisition proposal it believes is “compelling”.

The auction process is expected to draw bids of around $100 million, with Mercer seen as Link’s primary rival in a race that has also drawn significant interest from private equity.

ACCC chairman Rod Sims said the watchdog was wary about waving through a deal between Pillar and Link given they are the only two administration service providers that currently service larger superannuation funds.

“The ACCC is concerned that the possible acquisition is likely to substantially lessen competition in the supply of superannuation administration services by entrenching Link’s dominant position, resulting in lower service levels or higher prices, which will ultimately be passed on to fund members,” he said.

“The ACCC is concerned that the possible acquisition will remove the only alternative superannuation administration services provider with the demonstrated capacity to supply administration services to larger funds in competition with Link. Consequently, there would be one dominant administration provider facing limited competitive constraint in the outsourced market.”

Link said it was currently reviewing the statement of issues and hinted it had no plans to drop out of the race.

“Link Group has a compelling proposition for the State of NSW which would fully address the requirements of the enabling legislation and the sale process,” the group said in a statement.

“Link Group generally remains active in considering and assessing any opportunities that may exist.”

Mr Sims suggested a sale to another company would be preferred given it could result in further investment in Pillar to make it a stronger rival to Link.

While the watchdog has flagged issues, it is yet to officially rule as it seeks further information from industry players.

A final decision is expected on December 15.