Penam, the Czech bakery business owned by local food and agriculture conglomerate Agrofert, has been given the all-clear to buy local peer UB Holding and its subsidiary United Bakeries.

But in its ruling, the country’s competition authority, the Office for the Protection of Competition (ÚOHS), said Penam will have to sell off some of its plants in order to “maintain effective competition”.

The UOHS ruling said: “The inputs received from third parties as well as information submitted by the merging undertakings during the administrative proceedings showed that the concentration raised serious concerns of significant distortion of competition resulting from the expansion of Agrofert’s activities in the wholesale market of fresh bread and bread products, toast bread, fresh rolls and other fresh bakery products. 

“In particular, the merged entity would gain a substantial market share in comparison to other competitors, resulting in the impossibility to exert sufficient competitive pressure on Agrofert.

“In order to eliminate the office’s concerns of distortion of competition, Agrofert  accepted structural commitments consisting of an obligation to sell off several production plants of the merging parties. The divestiture will result in substantial reduction of the acquirer’s market share.”

Earlier reports suggested Penam controls about 30% of the Czech bakery market and United Bakeries around 15%. They are the two largest bakery businesses in the country.

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By GlobalData

Media reports in the Czech Republic have suggested Penam will seek cost savings after the acquisition.

Penam operates 11 bakeries and four mills in the Czech Republic, mainly in Moravia.

United Bakeries, which produces pastries under the brands Delta, Odkolek or Cerea, has more than 1,000 employees in 13 bakeries in the Czech Republic with most of its production capacity is in Bohemia. 

Prague-based Agrofert previously bought United Bakeries back in 2011 but the merger between the companies broke down.