Competition Watchdog Provisionally Approves Bakery Merger
A competition watchdog has provisionally approved the merger of two leading bakeries in Northern Ireland. The agreement involves ABF bakeries, owner of the Sunblest brand, acquiring Hovis, which markets brands including Ormo.
Initially, the Competition and Markets Authority (CMA) indicated that ABF would need to divest its Northern Ireland bakery operations to a third party to secure approval for the broader UK merger. However, this condition has now been lifted after the CMA determined that no credible buyer has emerged to maintain ABF's Northern Ireland business as an independent competitor.
Initial Concerns Over Market Competition
In March, the CMA expressed concerns that the merger would reduce competition in the supply of key components of an Ulster Fry. The authority noted that the combined entity would hold approximately 80% of the Northern Ireland pancake market, 60% of soda farl sales, and nearly 50% of potato bread sales.
The CMA's provisional findings stated that such market dominance would likely result in
"a substantial lessening of competition".
Revised Position Based on New Evidence
Subsequently, the CMA revised its stance after reviewing new evidence about the potential fate of ABF's Northern Ireland operations if the merger were blocked. This reassessment centered on the legal principle of the "counterfactual," which considers the most probable scenario should the merger not proceed.
The CMA engaged in discussions with potential third-party buyers and concluded that no alternative purchaser was willing or capable of acquiring ABF's Northern Ireland business and operating it as a direct competitor to Hovis.
Given that the loss of competition in Northern Ireland is anticipated regardless of merger approval, the CMA determined that the transaction itself cannot be held responsible for a substantial lessening of competition.
Consequently, the CMA has aligned its Northern Ireland position with its earlier clearance of the merger between the two businesses in Great Britain.
