Bakery merger cleared by competition watchdog

A competition watchdog has provisionally cleared the way for a merger of two major bakeries in Northern Ireland.

The deal will see ABF bakeries, the owner of Sunblest, taking over Hovis, whose brands include Ormo.

The Competition and Markets Authority (CMA) had initially signaled that ABF would need to sell its NI bakery business to a third party to get a broader UK deal approved.

It has now removed that barrier after finding that no credible buyer has emerged to keep the ABF business in NI running as an independent competitor.

In March the CMA had found that supply of key parts of an Ulster Fry would become uncompetitive if the merger went ahead.

It said the merged business would control 80% of the NI market in pancakes, 60% of soda farl sales and nearly 50% of potato bread.

Its provisional findings said this would be expected to result in "a substantial lessening of competition".

However the CMA reversed its position because of new evidence regarding what would happen to ABF in Northern Ireland if the merger was blocked.

The change hinges on the legal concept of the "counterfactual" - the most likely scenario that would unfold if the merger transaction were not allowed to proceed.

It held discussions with potential third-party purchasers and concluded that no alternative buyer was willing or able to acquire the Northern Ireland business and keep running it as a direct competitor to Hovis.

Since the loss of competition in Northern Ireland is expected to happen regardless of whether the merger is approved, the transaction itself cannot be blamed for a Substantial Lessening of Competition.

As a result, the CMA has now aligned its Northern Ireland position with its earlier clearance of the merging of the two businesses in Great Britain.