It hasn't been a great day for shareholders of PMP Limited (ASX: PMP). The printing company's share price has crashed by almost 15% to 68.5 cents this morning after the Australian Competition and Consumer Commission (ACCC) expressed concerns over its proposed merger with IPMG.
This is without doubt a bitter blow for the company as the merger looked set to create a real force in the industry. When the merger plans were announced in October the market reaction was extremely bullish in sending PMP's share price higher by a whopping 37%.
According to the release: "The ACCC's preliminary view is that the merger may substantially lessen competition in the supply of heatset web offset printing, the main method for printing catalogues and magazines."
The next step for the ACCC will be to ask industry participants whether they believe there are alternatives to the two companies for catalogue and magazine printing.
Further, ACCC Chairman Rod Sims advised that "the ACCC is also considering whether a merged PMP-IPMG could 'foreclose' rival catalogue distributors, particularly through offering customers a bundled print and distribution arrangement."
Submissions have been sought by the end of January, with the final decision expected to be made on February 23 2017.
Things don't look good for this merger in my opinion, so shareholders may have a nervous wait ahead of them.
I wouldn't recommend investors buying the dip today because if the merger is ultimately denied by the ACCC, then I believe PMP's share price is likely to fall much lower still.
Investors looking for exposure to the printing industry might be better off with an investment in PMP's rival IVE Group Ltd (ASX: IGL). With its shares expected to provide a fully franked 8.3% dividend in FY 2017, it certainly is an appealing option for income investors.
