Completed acquisition by Danisco A/S of the food ingredients business of Rhodia SA

Affected market: Food ingredients

No. ME/1001/04

Please note that the full text of the decision can be downloaded from the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, assessment and decision.

The OFT's decision on reference under section 22 given on 3 June 2004.

PARTIES

Danisco A/S (Danisco) is an international producer of food ingredients that is based in Denmark. It develops and produces food ingredients, feed ingredients, sweetners and sugar and has a presence in approximately 40 countries. In the year ended 30 April 2003, Danisco achieved a worldwide turnover of 16,551 million DKK (approximately £1.4 billion).

Rhodia Food (Rhodia) is an international food ingredients business that is based in France and owned by Rhodia S.A., a global manufacturer of speciality chemicals. Rhodia is active in over 40 countries wordwide and supplies cultures, natural texturants and food protection solutions to food processing companies. In 2003 Rhodia achieved a worldwide turnover of approximately €214 million (£148 million), of which [ ] (see note 1) was generated in the UK.

TRANSACTION

The transaction will take the form of the acquisition of a combination of assets and shares from Rhodia S.A.. It does not involve the acquisition of any UK assets or shares. The transaction was notified on 31 March 2004 and completed on 1 June 2004. The 40 day administrative deadline is 3 June 2004 and the statutory deadline expires on 30 September 2004.

JURISDICTION

As a result of this transaction Danisco and Rhodia have ceased to be distinct. The parties overlap in the supply of cultures in the UK and the share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met. A relevant merger situation has been created.

ASSESSMENT

Post merger the parties will have an EEA combined share for all cultures of [25-35] per cent (see note 1) (increment [5-15] per cent (see note 1)) and face competition from three major suppliers and a number of smaller suppliers with spare capacity.  On the basis of a narrower segmentation of dairy and cheese cultures the parties combined EEA shares of supply are [30-40] per cent (see note 1) (increment [10-20] per cent (see note 1)) and [30-40] per cent (see note 1) (increment [less than 10] per cent (see note 1)) respectively. However, as with the supply of cultures, the parties will face competition from two or three other major suppliers and a number of smaller players.  In addition, there is evidence that manufacturers of different types of cultures are able to switch production and would therefore act as a constraint on the behaviour of the merged entity. While for both the supply of cultures and the separate dairy and cheese segments, there appear to be some barriers to new entry, low barriers to expansion allow smaller competitors to expand production relatively quickly. Moreover, customers seem to possess some degree of negotiating strength stemming from their ability to switch to other suppliers or to bring production in-house.

Consequently, the OFT does not believe that it is or may be the case that the merger has resulted or may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.

1. Actual figures replaced by a range, or deleted, at the request of the parties for reasons of commercial confidentiality.

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