Anticipated acquisition by Brakes Bros Limited of Woodward Foodservice Limited

Affected market: Catering

No. ME/3727/08

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, third party views, assessment and decision.

The OFT's decision on reference under section 33(1) given on 19 August 2008. Full text of decision published 22 August 2008.

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

PARTIES

Brakes Bros Limited (Brakes) is active in the supply of food and related products to the catering industry in the UK and France. It provides delivered wholesale and contract distribution and it also supplies food products to the retail sector. Brakes was acquired in 2007 by Cucina Acquisition (UK) Limited, a company controlled by certain funds of Bain Capital.

Woodward Foodservice Limited (Woodward), ultimately controlled by WF Group Holdings Limited (WF Group), is also active in the supply of food and related products to caterers in Great Britain. It provides delivered wholesale and provided contract distribution and it also supplies food products to the retail sector. In its last reported financial year (year ending 31 March 2007) the UK turnover of Woodward was £187 million.

TRANSACTION

The proposed transaction involves the acquisition of sole control of Woodward by Brakes. In 2006 the WF Group acquired another UK foodservice operator which trades under the name of DBC. The proposed transaction does not involve DBC's foodservice business, which will continue to operate as an independent entity.

The parties notified the transaction to the Office of Fair Trading (OFT) on 27 June 2008. The administrative deadline for the OFT to decide whether to refer the merger to the Competition Commission (CC) is 22 August 2008.

JURISDICTION

As a result of this transaction Brakes and Woodward will cease to be distinct. The UK turnover of Woodward exceeds £70 million, so the turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act) is satisfied. 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.

THIRD PARTY VIEWS

The OFT received comments and views about the merger from a large number of third parties, including competitors and customers of the merging parties.
 
None of Brakes' national customers and competitors for the national customers expressed any concerns about the merger. None of the competitors identified by Woodward expressed concerns. The concerns expressed by third parties have been dealt with above, but they were largely unsubstantiated and/or not merger-specific.

ASSESSMENT

The parties overlap in the delivered wholesale of all food temperature ranges to both national accounts and independent customers. On a wide market definition including all temperature ranges, types of customers and modes of supply, the parties' combined share of supply is [10-20] per cent with an increment of one per cent.

There is not a realistic prospect that merger will substantially lessen competition in the market for national accounts given that there are a number of alternative suppliers to customers, notably under the contract distribution mode, and that the overlap between the parties in this segment is very small, as evidenced by the minimal market share increment (less than one per cent). No third party raised any concerns about the impact of the merger on this segment.

In the supply of food products to independent customers, the OFT considers that the parties are constrained by local or regional suppliers to different regions of Great Britain, and that the merger does not raise competition concerns in any particular region. In addition, the parties are to some extent constrained by other modes of supply such as cash and carries.

Some concerns were expressed by some independent customers who seem very unwilling to switch. However, the evidence before the OFT suggests that the current lack of switching is mainly caused by customers' conservatism rather than barriers to switching or lack of alternative suppliers, and that the merger will not increase the merging parties' ability to increase prices or decrease quality to these particular customers.

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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