Kerry Group’s acquisition of UK frozen ready-meals manufacturer Headland Foods is set to be the subject of a competition probe after complaints from retail customers.
The deal was finalised in January but in early March the UK’s Office of Fair Trading opened an investigation into the possible impact on competition.
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The OFT invited interested parties to comment on the acquisition and it said today (12 July) that the companies’ main customers had “expressed strong concerns” about the deal. The watchdog has now referred the deal to the UK’s Competition Commission for an in-depth investigation.
Before the deal, Kerry and Headland were “by far the two largest suppliers of frozen ready meals to UK retail customers”, the OFT said.
Kerry and Headland’s customers told the OFT that they were concerned about “the significant price rise that followed the merger and the lack of alternative manufacturers capable of supplying large volumes and wide ranges of frozen ready meals”, the watchdog said.
Amelia Fletcher, chief economist at the OFT and the decision maker in this case, added: “Significant price rises after any completed acquisition give the OFT cause for concern. In this case, the merged company’s large share in the frozen ready meals market compared with that of its competitors corroborated that concern, as did the strength of complaints from retail customers.
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By GlobalData“Though increases in raw material costs may justify part of the increase, this did not fully allay our concerns. The merger will therefore be referred to the Competition Commission for an in-depth investigation.”
