Brookes Avana deal: little competition referral risk
Experts have said that they do not foresee the deal being referred to the Competition Commission (CC), despite Tuesday’s (January 23) announcement that the Office of Fair Trading (OFT) had invited views from a variety of stakeholders to comment on the recent acquisition.
The OFT confirmed that it would listen to written representations on “any competition or public interest” issues relating to the deal.
Julian Wild, food group director at law firm Rollits, told FoodManufacture.co.uk: “I would be surprised if the competition authorities want to look at the Brookes Avana deal as it is entirely private label. In the past they have tended to take the view that the major retailers are big and strong enough to deal with this type of deal.
“I think it is more likely that any issues relating to this deal would have been stirred up by the competition, rather than the consumer.”
Jeff Stent, analyst at Exane BNP Paribas agreed. He told FoodManufacture.co.uk that he did not believe the size of the deal was significant enough in the market to attract the attention of the authorities.
“A major customer of Brookes Avana is Marks & Spencer, which is also a customer of 2 Sisters,” he added.
“I think if you take a market view then there is not going to be much of an issue. But M&S may have a different view, although I would imagine it would have been sounded out as early as possible.
“In the overall market it is not that big, so any competition issues are unlikely.”
The deal was first announced on December 8 last year with analysts describing it as a “win-win deal”. Experts have now confirmed that the acquisition had been completed and that Premier had “received the cheque”.
One unnamed analyst told FoodManufacture.co.uk that the OFT’s decision did not mean that the deal would definitely escape attention from the competition authorities and that there was still “some risk”.
Any issues that arise from the deal, would be “2 Sisters’ problem alone”, the analyst confirmed. But it was understood that Brookes Avana would be kept separate from the rest of the 2 Sisters business.
Wild added: “It is not impossible for the competition authorities to divest a deal after it has been completed. And generally these things are taken into account before the deal is completed. In this case time wasn’t on 2 Sisters’ side as they were keen to push the deal through.”
He cited the example of Kerry Group’s acquisition of Headland Foods last year as an example of a deal being referred after completion.
Kerry’s acquisition of Headland was referred to the Competition Commission after strong concerns were lodged with the OFT. It described the two firms as “by far” the largest suppliers of frozen ready meals to UK retailers.