OFT accepts Boparan's offer to sell Christmas pudding business to remedy merger concerns
97/12 25 October 2012
The OFT has today accepted undertakings from Boparan Holdings Ltd (BHL) to sell a Christmas pudding manufacturing business to remedy competition concerns raised by its proposed acquisition of R F Brookes and Avana Bakeries.
As a result, the merger will not be referred to the Competition Commission.
The UK Christmas pudding market is worth between £40m to £50m a year. The OFT's investigation found that the merger would bring together the two largest suppliers of Christmas puddings in the UK, and that the loss of competition arising from the deal could lead to price rises for consumers.
Following its investigation, the OFT announced on 19 March 2012 that it was suspending its duty to refer the merger to the Competition Commission because it was considering whether to accept undertakings in lieu of a reference.
In order to meet the OFT's concerns, BHL offered to sell one of two Christmas pudding manufacturing businesses to a suitable upfront buyer approved by the OFT. The agreed purchaser for the Avana Christmas pudding business is Sargents Bakeries Limited (Sargents), a manufacturer of tarts, pies and mince pies.
The OFT assessed and consulted publicly on the proposed undertakings, including on the suitability of Sargents as the buyer. The OFT did not receive any concerns in response to its public consultation.
Amelia Fletcher, Chief Economist at the OFT and Decision Maker in this case, said:
'Following a consultation, and having carefully assessed the financial position and commitment of the purchaser, Sargents, we are satisfied that this divestment will ensure there continues to be effective competition in this market.'
- The Reference Test - The OFT has a duty to make a reference to the Competition Commission if the OFT believes that it is or may be the case that a relevant merger situation has been created; and the creation of that situation has resulted or may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services.
- Under the Enterprise Act 2002 a relevant merger situation is created if two or more enterprises have ceased to be distinct enterprises; and the value of the turnover in the United Kingdom of the enterprise being taken over exceeds £70 million; or as a result of the transaction, in relation to the supply of goods or services of any description, a 25 per cent share of supply in the UK (or a substantial part thereof) is created or enhanced.
- Undertakings in lieu of reference - under section 73 of the Enterprise Act 2002 the OFT may, instead of making a reference to the Competition Commission, and for the purpose of remedying, mitigating or preventing the substantial lessening of competition concerned, or any adverse effect which may be expected to result from it, accept from such of the parties concerned as it considers appropriate undertakings to take such action as it considers appropriate.
- Undertakings in lieu of reference are appropriate only where the remedies proposed to address any competition concerns raised by the merger are clear cut. Furthermore, those remedies must be capable of ready implementation.
- Up-front buyer requirement - the OFT considered in this case that a necessary precursor to accepting undertakings in lieu is that the divestiture should be agreed up-front to a suitable buyer approved by the OFT. This means that the OFT consults publicly on the suitability of the proposed buyer, as well as all other aspects of the draft undertakings, during the public consultation period.
- The undertakings will come into effect from today.
- The full text of this decision and a copy of the agreed undertakings will appear in the mergers section of this website at a later date.
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