The Competition and Markets Authority (CMA) has warned that it might block a tie-up between two major sugar brand makers if they cannot allay concerns that the deal could lead to higher prices for consumers.
In November last year, T&L Sugars’ (TLS) announced that it planned purchase Tereos UK & Ireland’s (TUKI) business-to-consumer packed sugar business from its parent Tereos SCA. Financial details were not disclosed.
TLS is a sugar producer which refines and distributes sugar and related products, including under the Tate and Lyle brand, to supermarkets and other businesses such as wholesalers, hotels, and cafes in the UK. TUKI’s B2C unit sources sugar from its Europe-based parent company and uses a facility in Normanton, West Yorkshire, as a packing and distribution site to sell packed sugar in the UK, including under the Whitworths brand.
Following an initial Phase 1 investigation that launched at the beginning of January, the CMA revealed today that it had found the deal could lead to a “substantial lessening of competition”.
TLS and Tereos now have five working days to offer solutions which fully resolve the regulator’s competition concerns. If not, the regulator will launch an in-depth second-phase investigation that could potentially lead to the deal being blocked.
The CMA noted that the two companies only face competition from one other company, British Sugar, in the supply of packed sugar to a range of businesses, including supermarkets. The regulator stated that it was concerned that loss of competition from the deal could lead to supermarkets paying more for packed sugar, which would mean shoppers seeing higher prices on shelves.
Sorcha O’Carroll, Senior Director of Mergers at the CMA, said: “The supply of sugar to grocery retailers in the UK is already highly concentrated. This deal would bring together two of the three players in the UK sugar sector, reducing competition and choice further for people and businesses.
“It’s now up to TLS and Tereos to find a way to address our competition concerns to avoid the deal being referred to an in-depth Phase 2 investigation”.
NAM Implications:
- Deals between UK sugar companies have always been a sensitive issue.
- So CMA attention was inevitable in this case…
- Which means distraction for stakeholders.
- (and possible opportunities for rivals)
