The OFT has cleared the anticipated acquisition by Premier Foods plc of RHM plc. The OFT announced its decision not to refer this merger to the Competition Commission under the Enterprise Act 2002 on 5 February 2007.
Premier Foods plc (Premier) produces and sells grocery products, including soups, sauces, vegetarian and convenience foods, sweet spreads, desserts and beverages. It proposes to acquire RHM plc (RHM), also active in the production and sale of grocery products, including meat-based complements, cooking powders, sauces, noodles and fruit-based sweet spreads.
The OFT found that the Enterprise Act turnover test is satisfied as the UK turnover of RHM exceeds £70 million. It, therefore, concluded that a relevant merger situation has been created. Competition Assessment, inter alia:
Prepared gravies to the retail sector. Although the merger will combine the leading supplier of prepared gravies (RHM with a 60-70% market share) and the leading supplier of stock (Premier with up to 10% of the market share), the OFT found that the parties are not each other's closest competitor. Own label prepared gravies, with a combined 20% of the market, act as a constraint on RHM's sales of Bisto. There are also low barriers to entry. The OFT did not consider that the loss of Premier's OXO gravy as a constraint on Bisto would significantly affect competition postmerger.
Fruit-based sweet spreads. Post-merger, the parties will have a combined share of supply of 25- 35% of the jams market (representing an increase of 10-15%). The OFT, however, found the jams market to be highly competitive. It found no competition concerns in relation to the wholesale supply of own label jams. The OFT also found that there a number of competitors present on the marmalade market, where there is also the possibility of expansion by continental suppliers into the UK.