Rendering merger faces in-depth investigation unless undertakings offered
Linergy’s acquisition of Ulster Farm By-Products will be referred for an in-depth phase 2 investigation unless acceptable undertakings are offered.
The Competition and Markets Authority (CMA) has found that the completed acquisition gives rise to a realistic prospect of a substantial lessening of competition in the processing of animal by-products from non-fallen stock and fallen stock in Northern Ireland. Customers include meat processors, such as abattoirs and slaughterhouses, and purchasers of outputs from the rendering process.
Linergy Limited (Linergy) and Ulster Farm By-Products Limited (UFBP) had plans to merge in 2011/12. However, in March 2012, following the decision of the Office of Fair Trading (OFT) to refer that merger to the Competition Commission for an in-depth phase 2 investigation, Linergy and UFBP abandoned their merger plans. Shortly after the merger was abandoned, SAPI SpA (SAPI) acquired UFBP. On 8 May 2015, Linergy acquired UFBP from SAPI, and SAPI acquired 30% of the combined Linergy/UFBP.
Andrea Coscelli, CMA Executive Director, Markets and Mergers and decision-maker in this case, said:
Processors of animal by-products and fallen stock play an important role in the food service industry.
The CMA has found that the merger between Linergy and UFBP may lead to a substantial lessening of competition in the processing of animal by-products and fallen stock in Northern Ireland, giving rise to the prospect of increased prices or reduced quality of service to meat processors.
Unless Linergy offers acceptable undertakings which resolve the competition concerns, this transaction will face an in-depth investigation to ensure that it will not result in a substantial lessening of competition.
Notes for editors
- The phrase ‘animal by-products’ refers to what remains of an animal after meat and offal for human consumption, and other uses, has been removed. The phrase ‘fallen stock’ refers to animals that have died on farms.
- The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law. From 1 April 2014 it took over the functions of the Competition Commission and the competition and certain consumer functions of the OFT, as amended by the Enterprise and Regulatory Reform Act 2013.
- Under the Enterprise Act 2002 (the Act) the CMA has a duty to make a reference to phase 2 if the CMA believes that it is or may be the case that a relevant merger situation has been created, or arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation; 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 Act a relevant merger situation is created if 2 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 (‘the turnover test’) or as a result of the transaction, in relation to the supply of goods or services of any description, a 25% share of supply in the United Kingdom (or a substantial part thereof) is created or enhanced (‘the share of supply test’).
- The CMA’s duty to refer the merger for a phase 2 investigation under section 33(1) of the Act is not exercised whilst the CMA is considering whether to accept undertakings (if offered) under section 73 of the Act in lieu of a reference. Linergy has until 24 July 2015 to offer an undertaking to the CMA that might be accepted by the CMA under section 73(2) of the Act. If no undertaking is offered or accepted, then the CMA will by 31 June 2015 refer the merger.
- All the CMA’s functions in phase 2 merger inquiries are performed by inquiry groups chosen from the CMA’s panel members. The appointed inquiry group are the decision-makers on phase 2 inquiries. The CMA’s panel members come from a variety of backgrounds, including economics, law, accountancy and/or business. The membership of an inquiry group usually reflects a mix of expertise and experience (including industry experience).
- The inquiry group may extend the 24-week period within which it is required to publish its report by no more than 8 weeks if it considers that there are special reasons why the report cannot be published within that period.
- The full text of this decision will be placed on the case page as soon as is reasonably practicable.
- Enquiries should be directed to Siobhan Allen (siobhan.allen@cma.gsi.gov.uk, 020 3738 6798).
- For information on the CMA see our homepage, or follow us on Twitter @CMAgovuk, Flickr and LinkedIn. Sign up to our email alerts to receive updates on merger cases.