2 Sisters and Dunbia deal may spark ‘competition probe’

News of a potential joint venture emerged last week but both companies still remain tight lipped about any prospect of a partnership. 

The two manufacturers are understood to be in exclusive talks about a joint venture focusing on their red meat businesses, with speculation that a deal was close.

Shore Capital analyst Clive Black told FoodManufacture.co.uk: “Dunbia has a tremendous capability in beef and lamb and has a much smaller pig operation.

“2 Sisters is very strong in poultry with a growing presence in beef and lamb. So, potentially the piece of the jigsaw could sit very well.”

But any deal could attract the interests of the Competition and Markets Authority (CMA), competitors and retailers, he warned.

‘It lives in a totally different planet’

“What will the UK Competition and Markets Authority make of it?  It lives in a totally different planet and parallel universe, which is virtually impossible to predict,” he said.

There would also be an issue with retailers who use the suppliers, he said.

“The conundrum is what retailers think of it, especially the UK supermarkets, as 2 Sisters is already a significant player in the protein market,” he added.

“Clearly, there is a lot of noise. There has been a process for some time with respect to Dunbia and there have been suitors associated with the business.

“The 2 Sisters story is perhaps the hottest one. But, frankly, until it’s confirmed, it is just speculation.”

‘Too early’ to comment

The CMA told Foodmanufacture.co.uk that it was “too early” to comment and it would not confirm in advance any investigations. 

A spokesman said there were a number of interrelated factors that would be taken into account if such a deal was to take place.

Those included five key questions, including: what would happen in the absence of merger; what is the the existing level of competition between merging companies; how many other competitors were there, how easily could customers switch to another provider in event of developments such as price rises and what is the potential competition from new entrants or expansion in the market?

“But the legal test is whether all this adds up to whether the deal might lead to a substantial lessening of competition in particular market,” the CMA spokesman said. 

“If the deal is to be referred for a full investigation, it has to meet one of two thresholds – UK turnover of company being acquired is over £70M or the merger increases the combined share of the merging companies to at least 25% of the relevant market.

“However, meeting one or both of these thresholds doesn’t automatically mean it will be referred.”

Meanwhile, the CMA’s predecessor, the Office of Fair Trading, decided not to investigate 2 Sisters’ acquisition of Storteboom Group in July 2010. It reached the same decision in July 2013 when 2 Sisters owner Boparan Holdings purchased of Vion Poultry.