The UK’s Competition Commission has provisionally cleared Heinz’s competed acquisition of the HP Food Group.
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“Heinz is delighted with the initial findings of the Competition Commission and we continue to cooperate fully with them as they review the merits of our acquisition of HP Foods,” said William R. Johnson, Heinz chairman, president and CEO.
In August 2005, Heinz completed the purchase of HP Foods for GBP470m (US$823.79). Both Heinz and HP produce tomato ketchup, brown sauce and barbecue sauce. Heinz also produces baked beans and tinned pasta products, while HP branded baked beans and pasta products are currently produced by Premier Foods, under a licence from HP.
The Competition Commission found that HP and Heinz ketchup, brown sauce, baked beans and pasta were not acting as a competitive constraint on one another. While the Commission did find evidence of competition with BBQ sauce, it said that there were relatively low barriers to entry into the market and retailers did not consider it a ‘must stock’ item, meaning that Heinz would be unable to significantly raise prices.
Robert Turgoose, chairman of the Inquiry Group, concluded: “We’ve provisionally concluded that there was very limited, if any, competition between Heinz and HP products in the supply to retail customers, so in spite of the increased size of the merged company we do not expect a substantial loss of competition or an increase in prices to result from the merger.”
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