The acquisition proposal was first referred to the Commission in April after concerns were raised by competition authorities in Spain, Portugal and France that the transaction would significantly reduce effective competition in their baker’s yeast markets.
Following an in-depth investigation over the past five months, the Commission concluded that competition in France would not be significantly impeded by the transaction, but that the original proposal would have restricted competition in Spain and Portugal, leaving Lesaffre as the only major competitor to ABF in the compressed yeast market. As a result, ABF has agreed to divest the GBI plants in Spain and Portugal to a buyer with sufficient production capability to supply the businesses.
To ensure that the acquirer is able to meet production requirements, ABF suggested two possible solutions and the European Commission has agreed to clear the transaction on the basis that one of them is implemented. The first, most straightforward option is for ABF to sell its existing Portuguese plant. The other option would require the buyer of the Spanish and Portuguese facilities to also acquire GBI’s former production plant in the UK. Until the transactions have been completed GBI still owns the Spanish and Portuguese plants and will continue to produce yeast from them until a buyer is found.
ABF spokesman Geoff Lancaster told bakeryandsnacks.com: “This is the remedy that we suggested and the Commission accepted it. Acquisitions of this type are subject to scrutiny and we are pleased to have been able to come up with a remedy. Now we are raring to go and integrate the businesses fully.”
Both ABF and GBI produce dry, compressed and liquid baker’s yeast for the bakery sector across Europe. The initial transaction proposal came to the Commission’s attention as it did not meet the threshold requirements to be considered as a merger of a European dimension under Article 22 of the EU's Merger Regulation.
ABF originally announced its intention to acquire parts of GB Ingredients in October 2007, including the acquisition of its yeast business in Italy and a 50% share of German joint venture Uniferm. Unlike the transactions in Spain, Portugal and France, these acquisitions were able to be completed relatively quickly.
In a Commission statement, competition commissioner Neelie Kroes said: “The merging parties have offered a remedies package that provides strong safeguards that customers of baker's yeast will not be harmed by this consolidation.”
Before this most recent deal, ABF already had four production plants in the EU situated in the UK, Ireland, Spain and Portugal. Its yeast division, AB Mauri, has been expanding since it was acquired from Burns Philp in 2004. The acquisition of GBI takes ABF’s total acquisition expenditure to £225m for the full year ending September 13 2008, although the company has not disclosed the value of the GBI deal alone.