The UK’s Competition and Markets Authority (CMA) has launched an investigation into the proposed £1.2bn ($1.63bn) merger between Greencore and Bakkavor.
In a statement released today (8 July), the watchdog said it will focus whether the merger will lead to “substantial lessening of competition” in the food-to-go, ready meals, and prepared food markets where both companies operate.
The CMA is currently seeking comments on the potential impact of this merger from interested parties.
Stakeholders have a deadline of 22 July to submit their views before the CMA starts the phase one investigation.
The initial phase of an investigation typically aims to determine if the merger could significantly reduce competition in the market.
If the phase one investigation indicates a fair risk of reduced competition, a more detailed phase two investigation follows.
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By GlobalDataThe news comes just a day after Bakkavor shareholders supported the deal, with 99.98% voting in favour.
Greencore’s directors had already approved the transaction, which aims to create a combined private-label business with revenue of approximately £4bn.
Greencore, headquartered in Dublin, secured agreement in principle from Bakkavor’s board in April after two previous bids were rejected, with the cash and stock deal being formalised in May.
One potential hurdle for Greencore in finalising the transaction is job losses.
Greencore estimates that up to 5% of the combined workforce could be affected by office and factory consolidations, potentially impacting as many as 1,525 employees.
However, CMA’s primary concern in such mergers is their impact on competition, along with any implications for consumers, redundancies could be considered if they are linked to competition issues.
Analysts suggest that a significant reduction in competition is unlikely due to limited overlap in the companies’ portfolios.
However, the ready meals segment could be contentious, as both companies compete with branded manufacturers in this area.
Other overlapping segments include sandwiches and prepared salads, which are supplied to supermarkets under own-label food-to-go offerings.
Bakkavor also produces bagged salads for major chains.
Bakkavor would add pizza, breads, desserts, and chilled dips to Greencore’s portfolio, complementing its existing range of products including sushi, chilled snacks, quiche, soups, sauces, pickles, and Yorkshire puddings.
Consumers could benefit from the merger if it leads to lower prices, although it could also give the combined entity more leverage to increase prices.
Citing a source, Just Food reported on 21 May that the CMA might approve the merger but could impose conditions.
In a 15 May filing, Greencore indicated it might abandon the Bakkavor deal if the CMA imposes stringent conditions, citing rule 13.5 of the UK Panel on Takeovers and Mergers codes.
“The CMA is a body that’s a law unto itself, albeit it has been encouraged by government to be more pro-growth and we may be seeing a slight or evolving position from the CMA in terms of how it looks at deals. Whether that means the likelihood of more deals coming through remains to be seen,” the source told the publication at the time.
“There’s a remarkably limited overlap between Bakkavor and Greencore in terms of what they actually produce.”
