CMA Flags Competition Concerns on Unilever Foods Deal

Unilever (LON: ULVR) faces a possible in-depth UK inquiry into the sale of its food business to McCormick, after the competition regulator found the deal may substantially lessen competition. The Competition and Markets Authority (CMA) has not referred the deal to phase 2, its detailed inquiry, and will do so if no remedies are offered.

Unilever, the consumer goods group behind Knorr and Hellmann’s, traded at 4,948.5p at 8.41am, up 0.19% on yesterday’s close of 4,939p. That sits in the upper part of its three-month range of closes, 4,483.5p to 5,032p. The move is too small to tie to the CMA’s announcement.

The CMA, which reviews mergers affecting UK markets, announced its phase 1 decision at 7am today. The regulator’s statement set out the finding in these terms:

The CMA has decided, on the information currently available to it, the above merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

Competition and Markets Authority

Under section 73 of the Enterprise Act 2002, the parties can offer undertakings in lieu, meaning remedies such as disposals that avoid a phase 2 inquiry. The deadline is next Wednesday, the 18th of November. If none is offered, the CMA says it will refer the merger.

The stakes are large. The cash-and-stock combination, agreed on the 31st of March, values Unilever’s food business at about $44.8bn. A referral would delay completion of the deal.