Anticipated acquisition by Tetra Laval Group of part of Carlisle Process Systems

Affected market: Cheddar cheese-making equipment

No. ME/2415/06

The OFT's decision on reference under section 33 given on 20 November 2006. Full text of decision published 23 November 2006.

Please note that square brackets indicate figures or text which have been omitted or replaced with a range for reasons of commercial confidentiality.

PARTIES

Tetra Laval Group (Tetra Laval) is a privately held group of companies active in a number of industries, including the production and marketing of processing equipment for the food industry.

Carlisle Process Systems (CPS) is a division of Carlisle Companies Inc. (Carlisle Group), a company listed on the New York Stock Exchange. CPS is a systems and equipment business principally supplying the liquid food processing industries (mainly cheese and powder making). The UK turnover of the business being acquired was around £[ ] million in 2005.

TRANSACTION

On 10 April 2006, the parties entered into an agreement whereby Tetra Laval will acquire the shares of various subsidiary companies within Carlisle Group (the Target).

The Target business mainly consists of (i) the production and marketing of processing equipment, mainly for cheese making but also for dairy, food and beverage production under the 'Scherping' and 'Damrow' brands (in the USA and Denmark) and the 'Wincanton' brand (in the UK); and (ii) the production and marketing of evaporation and drying systems for the dairy, food, chemical and pharmaceutical industries.

JURISDICTION

As a result of this transaction Tetra Laval and the Target will cease to be distinct. The parties overlap in the supply of cheese vats, cheddaring machines and cheese towers. The combined UK share of supply exceeds 25 per cent in each case; therefore the share of supply test in section 23 of the Enterprise Act 2002 (the Act) is 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.

BACKGROUND

By way of a decision of 20 July 2006 (the Decision) the OFT announced that, on the evidence available to it, the OFT believed that it may be the case that the merger may be expected to result in a substantial lessening of competition in relation to the supply to UK customers of certain equipment used for the industrial manufacture of cheddar cheese. A copy of the decision, Annexe 1, can be downloaded from the related items column.

The OFT therefore suspended its duty to refer the transaction to the Competition Commission under Section 33 of the Enterprise Act 2002 because it was considering whether to accept appropriate undertakings from Tetra Laval in lieu of reference.

Tetra Laval has offered to give undertakings to grant a suitable purchaser an exclusive irrevocable EEA-wide licence of intellectual property rights relating to cheese equipment sold under the 'Wincanton' brand (the Divestment Package). The OFT considers that the proposed undertakings offered by Tetra Laval are, in the circumstances of this case, appropriate to remedy, mitigate or prevent the competition concerns identified in its Decision and is minded to accept these undertakings. The OFT considers that Moody would be a suitable purchaser of the Divestment Package given its significant experience as a supplier of services; new and used equipment to the dairy sector in the UK and that it will be able to utilise the Divestment Package to compete with Tetra Laval post-merger.

On 17 October 2006, the OFT published the proposed undertakings inviting interested third parties to give their views on them and on the proposed purchaser to the OFT. The OFT did not receive any responses that suggested that the proposed undertakings were not appropriate to remedy, mitigate or prevent the competition concerns identified.

DECISION

The merger would have been referred to the Competition Commission if Tetra Laval had failed to give suitable undertakings pursuant to section 73 of the Act to address the competition concerns outlined above, or if the purchaser had not been suitable. The OFT has decided to accept the proposed undertakings in lieu of reference as they address those competition concerns.

This merger will therefore not be referred to the Competition Commission and the undertakings, which have been signed by Tetra Laval, the text of which is attached as Annexe 2 which can be downloaded from the related items column, will come in effect from this date.

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