EC opens investigation into ABF yeast deal

By Dominique Patton

- Last updated on GMT

Related tags Yeast European union

The European Commission opened an in-depth investigation today into
Associated British Foods' plan to buy parts of Dutch yeast producer
GB Ingredients.

In a statement the Commission said that after an initial investigation it had "serious doubts" about the planned merger's "compatibility" with the single EU market because of possible competition problems, particularly in the market for compressed bakers' yeast in Portugal, Spain and France.

ABF announced plans to buy several parts of GBI in an internal memo in October 2007.

It has already completed the acquisition of a wet and dry yeast plant in Italy and a 50 per cent share of Uniferm, a German joint venture.

But plans to buy sales and distribution businesses in Portugal, Spain and France met with concern.

The three countries referred the case to the Commission as the merger would reduce the number of effective suppliers from three to two .

"The Commission must make sure that the planned transaction would not adversely affect the quality or price of yeast products which are essential for bakeries of all types and sizes and, so directly affect the daily bread of European consumers," said competition commissioner Neelie Kroes in the statement.

ABF's yeast business, AB Mauri, has been expanding since it was taken over by the group from Burns Philp in 2004.

"We've been investing in it considerably.

It's a growing part of our business," said ABF spokesman Geoff Lancaster.

AB Mauri now has five production plants in the EU (UK, Ireland, Germany, Spain and Portugal) as well as other parts of the world.

ABF also distributes yeast from its other plants.

Yeast is a key ingredient in bread and other bakery products, pizza, dough bases, beer, wine and other foodstuffs.

The company indicated recently that South America and China will be important expansion areas for the yeast business over 2008.

Last year it saw strong sales in south and west Asia too.

Lancaster could not comment on the current investigation.

The decision to open the inquiry does not prejudge the final result of the investigation, the Commission said.

It has until 28 August to decide whether the deal would hamper competition if it goes ahead.

The transaction was first notified to National Competition Authorities as it did not meet the thresholds to be considered as a merger of a European dimension under the EU's merger regulation.

It was referred to the Commission after requests from the competition authorities in Spain, Portugal and France, under Article 22 of the Merger Regulation.

GB Ingredients is one of the world's top 3 yeast manufacturers, reporting sales of €392 million in 2006.

Last year it sold off its bakery ingredients business to focus on yeast products.

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