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The Competition and Markets Authority (CMA) has said the merger may raise an issue in relation to the supply of own-label chilled sauces in the UK. These are prepared sauces, such as for pasta, heated for use in meals. Greencore, led by chief executive Dalton Philips, is hoping to create a convenience food business with a combined revenue of £4bn and over 30,000 employees. On September 1, the CMA launched a Phase 1 investigation into the proposed acquisition. Announcing its decision today, the regulator said it did not give rise to competition concerns in most of the areas reviewed, which the companies say relates to about 99pc of their combined revenues. As part of its investigation, the CMA looked at bidding data when the two companies took part in tenders for own-label chilled sauces, chilled ready meals and salads. It examined the companies’ internal documents to see how they view competitors, and spoke to grocery retailers about recent tender processes. While the CMA did not have concerns about the effect of a merger on the supply of own-label Italian chilled ready meals or own-label salads, it did in relation to own-label chilled sauces, because the new entity is set to become be one of their largest suppliers in the UK. “The only two other competitors that exert some material constraint on the parties - 2SFG and Billington Foods - are weaker competitors,” it said. “Other competitors provide only a very weak constraint. “The CMA found grocery retailers are generally unwilling or unable to sponsor entry at the scale that would restore competition to the level that would have prevailed absent the merger.” There will now be a Phase 2 investigation unless Greencore and Bakkavor offer an acceptable undertaking to address the competition concerns. They have until next Monday. One option would be an offer to sell off a product or manufacturing facility. The CMA then has five days to consider the proposed remedy and issue a response. If it accepts the proposed solution, Greencore would have 50 days to find a buyer for the product or plan, a process than can be extended by 40 days if necessary. Greencore said it and Bakkavor will work constructively with the CMA to bring the matters to a conclusion, and believes they are still on course to complete the transaction in early 2026. Mr Philips said: “The CMA process has been constructive and the Phase 1 decision is a welcome one, confirming our view of the highly complementary nature of our businesses and product portfolios across ‘food for now’ and ‘food for later’. We are now working with the CMA and Bakkavor for the benefit of all our stakeholders to complete the Bakkavor transaction early next year.” In a note to its clients, the adviser Jeffries said the CMA decision was “about as clean an outcome as could have been hoped for by shareholders, in our view. That being said, we doubt this will come as too much of a surprise to the market that we think had been largely anticipating a smooth passage through the CMA process”.
