The UK competition authority has started to scrutinise Greencore’s planned £1.2 billion (€1.39 billion) purchase of London-based peer Bakkavor.
The Competition and Markets Authority (CMA) said on Tuesday that it is inviting interested parties to file comments with it by July 22nd as part of its so-called phase one inquiry into the transaction.
“CMA is considering whether it is or may be the case that this transaction, if carried into effect, will result in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002 and, if so, whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services,” the agency said.
Dublin-based Greencore, led by its Irish chief executive Dalton Philips, secured backing from Bakkavor’s board in April for a deal to create a leading convenience food business in the UK with a combined revenue of £4 billion and about 30,500 employees. It would see existing Greencore investors own 56 per cent of the group, with Bakkavor investors holding the remainder.
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Some 99.96 per cent of Greencore shareholders that participated in a vote on the matter at an extraordinary general meeting last week backed the accord. Bakkavor investors supported the deal by a majority of 86.1 per cent on Monday.
[ Greencore signs up 69% of Bakkavor shareholders for recommended £1.2bn dealOpens in new window ]
Greencore knows Bakkavor well. The latter had built up an 11 per cent stake in the Irish business before the 2008 financial crisis, stoking takeover speculation at Greencore – then also 29.9 per cent owned by boomtime Irish property developer Liam Carroll.
At the time, speculation focused on whether Mr Carroll wanted Greencore’s defunct sugar plants in Carlow and Mallow for land development purposes.
Bakkavor, founded 40 years ago by Icelandic brothers Agust and Lydur Gudmundsson, sold its Greencore stake at a loss in October 2008 as the Gudmundssons saw their broader business empire come under pressure during the financial crisis.
Bakkavor almost went under during the worst of that period. The Gudmundssons lost control of the business for a period, before managing to regain it a decade ago with the help of a US hedge fund.
The two convenience food groups share the same customers among major UK supermarkets – but have limited crossover in products. Bakkavor would add pizza, bread, desserts and dips to Greencore’s range, spanning sandwiches to salads, sushi and ready-made meals.
