Kerry faces inquiry over food merger

AN INVESTIGATION into Kerry Group’s acquisition of British frozen food company Headland Foods Limited has been launched by the Competition Commission in the UK.

The Office of Fair Trading (OFT) has referred the merger of the two companies – which was completed last January – to the Competition Commission. Preliminary findings are due to be published in December.

Kerry Group and Headland Foods are two of the major suppliers of frozen ready meals into the UK market. In December, Kerry acquired Headland, which had been suffering from falling sales for a number of years, for an undisclosed sum.

Headland, which has operations in Flint in Wales and in the English town of Grimsby, had announced last November that it was to undertake a review of operations at its Flint plant. In February, after the completion of the Kerry acquisition, the closure of the plant was announced with the loss of more than 300 jobs.

In a statement yesterday, the Office of Fair Trading said almost all of the merged parties’ main customers expressed strong concerns about the merger, in particular the significant price rises that followed the deal.

“Significant price rises after any completed acquisition give the OFT cause for concern. In this case, the merged company’s large share in the frozen ready meals market compared with that of its competitors corroborated that concern, as did the strength of complaints from retail customers.”

A spokesman for Kerry Group said yesterday the company was “surprised that the OFT has decided to refer the acquisition to the commission”.

“We are confident that the commission’s investigation will not find any difficulty with the transaction.” He added that price increases had been a feature of the industry over the last 12 months due to the unparalleled rise in raw material and energy costs.

Amelia Fletcher, chief economist at the OFT, said that though increases in raw material costs may justify part of the price increase, it did not fully allay the OFT’s concerns.

The Competition Commission is due to report by the end of the year, at which point it could impose conditions or restrictions on the company, or force the company to sell off businesses or assets, which could include the company acquired in the initial merger.

Under British law, the OFT can refer to the Competition Commission mergers which lead to the creation or the enhancement of a 25 per cent market share, or where the UK turnover of the entity being acquired is more than £70 million (€79.6 million).