24 Sept - The European Commission has cleared under the EU Merger Regulation the proposed acquisition of certain parts of GBI of the Netherlands by the UK-based company Associated British Foods (ABF), subject to conditions.
Both companies produce dry, compressed and liquid baker's yeast. The Commission's in-depth market investigation, opened in April 2008 (see IP/08/591) had indicated that the concentration, as originally notified, would have raised competition concerns in the markets for compressed baker's yeast in Spain and Portugal.
To remedy the Commission's concerns, ABF offered to divest the GBI businesses in Spain and Portugal, whilst ensuring that these businesses will be linked to a sufficient production capacity. In light of these commitments, the Commission concluded that the proposed transaction would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.
Competition Commissioner Neelie Kroes said: “The merging parties have offered a remedies package that provides strong safeguards that customers of baker's yeast will not be harmed by this consolidation.”
ABF is an international food, ingredients and retail group. Its activities include the production and sale of yeast, managed through the AB Mauri division, which has production plants worldwide, including four plants in the EU (UK, Ireland, Spain and Portugal). ABF also owns two bakery ingredients plants in the UK (Cereform) and distributes yeast from its plants across the EU and elsewhere in the world.
The core activity of the GBI assets to be acquired is the production and sale of different types of yeast. The business comprises several European subsidiaries and assets of the GBI Group in Europe, except in the UK. The acquisition of GBI's business in the UK by Lesaffre was approved subject to conditions by the Commission in July 2008 (see IP/08/1135). GBI is ultimately controlled by the Dutch private equity house Gilde Buy-Out Partners.
Yeast is an essential ingredient in the production of bread and other bakery products, pizza, dough bases, beer, wine and other foodstuffs. The proposed transaction concerns liquid, compressed and dry yeast for the bakery sector only.
In its initial analysis, the Commission had serious concerns that the transaction, as originally notified, would have significantly impeded effective competition in the markets for compressed baker's yeast in Spain, Portugal and France. In these markets, the proposed transaction would have reduced the number of major competitors from three to two, with Lesaffre being the only remaining major competitor besides the merged entity.
An in-depth analysis of market structures and conditions in Spain and Portugal led to the conclusion that the merger would have resulted in coordinated market behaviour between the remaining competitors in these two markets. As regards the compressed yeast market in France, no competition concerns were confirmed, essentially given the different market structure in place there.
With a view to removing the Commission's concerns, ABF committed to divest GBI's business in Portugal and Spain to a suitable buyer with sufficient production capacities to supply those businesses. To ensure that the acquirer will have the required production capacities, ABF committed to one of two alternative remedies. Either the acquirer will have previously acquired GBI's former production plant in the UK or the parties will divest ABF's production plant in Portugal.
The Commission concluded that the commitments were sufficient to remedy its initial concerns. The Commission's decision is conditional upon full compliance with the commitments.