Irish convenience food company Greencore’s acquisition of Bakkavor Group has hit a roadblock as Britain’s competition authority has raised concerns that the proposed deal gives rise to a “realistic prospect” of a substantial lessening of competition in the supply of own-label chilled sauces.
During the summer, Greencore announced that it was to acquire its rival Bakkavor in a deal valued at £1.2bn (€1.38bn). At the time, the company said the deal would create a leading British convenience food business with a combined revenue of £4bn and approximately 30,500 employees.
Bakkavor’s retail customers include Tesco, M&S and Waitrose, while Greencore supplies all major British supermarkets.
The deal was initially expected to be completed early next year.
However, following an assessment by the the Competition and Markets Authority (CMA), it found that the acquisition gives rise to competition concerns in the area of own-label chilled sauces in Britain as a result of “horizontal unilateral effects”.
“The evidence indicates the merged entity will be one of the largest suppliers of chilled sauces and that the only two other competitors that exert some material constraint on the parties — 2SFG and Billington Foods — are weaker competitors. Other competitors provide only a very weak constraint on the parties,” the CMA said.
The CMA has given the businesses involved until November 3 “to offer undertakings” that will remedy the competition concerns identified.
As part of the assessment, the CMA also looked into competition in areas such as own-chilled sauces, own-label Italian chilled ready meals, and own-label salads.
“The CMA does not believe that the Merger raises competition concerns as a result of horizontal unilateral effects in the supply of own-label Italian chilled ready meals or own-label salads,” the agency said.
Chief executive of Greencore Dalton Philips said the process with the CMA has been “constructive” and this initial phase one decision is a “welcome one” adding that it confirms their view “of the highly complementary nature of our businesses and product portfolios across ‘food for now’ and ‘food for later’”.
“I am really grateful to my colleagues at Greencore and Bakkavor in successfully getting us to this point and we are now working with the CMA and Bakkavor for the benefit of all our stakeholders to complete the Bakkavor transaction early next year,” he added.
Greencore shares declined by just under 2% following the news on Monday morning.
Headquartered in Dublin, Greencore supplies nearly 750m food-to-go items each year and employs about 13,300 staff. Once the deal with Bakkavor is completed, it will create a convenience foods giant in Britain with a combined revenue of £4bn (€4.6bn) and approximately 30,500 employees.
Bakkavor supplies 3,500 products across meals, pizza, bread, salads and desserts to grocery retailers in the UK and US and international food brands in China.
Earlier this month, Greencore lifted its annual profit forecast to €144m driven by strong demand for food to go like sandwiches and sushi in the UK. Greencore now expects an adjusted operating profit of about £125m (€144m), up from its previous forecast of between £118m and £121m.
The revised figure surpassed market expectations of between £119.5m and £121.8m. Revenue for the year is expected to come in at £1.95bn (€2.25bn), up nearly 8% from 2024.
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