Anticipated acquisition by United Biscuits (UK) Limited of the Jacobs Bakery Limited

Affected market: Biscuits and savoury snack products

No. ME/1213/04

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

Please note that square brackets indicate figures or text which have been deleted or replaced with a range at the request of the parties for reasons of commercial confidentiality.

PARTIES

United Biscuits (UK) Limited (UB) is primarily active in the manufacture and sale of biscuits, cakes and savoury snacks. The Jacobs Bakery Limited (Jacobs) manufactures and sells biscuits, savoury snack products and other food products. It is currently owned by Groupe Danone. Its UK turnover in 2002 was approximately £[ ] million.

TRANSACTION

Following an auction process, UB has signed an agreement with Groupe Danone to acquire Jacobs together with its subsidiaries, including the Jacobs Northern Ireland Companies (W&R Jacobs & Co (Northern Ireland) Ltd and Irish Biscuits (N.I) Ltd). The merger was notified by merger notice on 29 July 2004 and the statutory period was extended on 20 August 2004. The statutory deadline expires on 10 September 2004.

JURISDICTION

As a result of this transaction UB and Jacobs will cease to be distinct. The UK turnover of Jacobs exceeds £70 million, so that the turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act) would be satisfied. Furthermore, the parties overlap in the supply of biscuits in the UK and the share of supply test in section 23 of the Act would be met. The OFT therefore believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation.

ASSESSMENT

Although UB and Jacobs will together account for a relatively high post-merger share of UK biscuit manufacturing, this is not a good guide to the dynamics of competition across the entire biscuit sector and in individual narrow segments (including crackers/crispbreads).

At the retail level, the parties will continue to face competition from a wide range of branded biscuit products, from strong retailer own label products, and to some degree from non-biscuit 'snacking' products. The numerous examples of new entry, particularly by 'non-core' biscuit manufacturers which appear to be gaining share at the expense of traditional biscuit manufacturers, will also constrain the parties' behaviour in the future. Finally, customers, especially the supermarket chains, also appear able to exert a degree of buyer power through their control of a key distribution channel for biscuit manufacturers and through the use of retailer own label products as a competitive discipline.

At the supply level, no concerns emerge that the merged entity would be able to raise prices to retailers of own label products. There remain a number of alternative biscuit manufacturers in the UK and abroad that can be – and are – used by retailers.

Finally, some competitors raised concerns regarding portfolio power and category management. However, no customers raised such concerns, indicating stocking decisions were made on a product-by-product basis.

Consequently, the OFT does not believe that it is or may be the case that the merger 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 33(1) of the Act.

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