Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: EC approves Sysco’s acquisition of Brakes, (Jun 9, 2016)
Organizations Mentioned:Brakes Group | Sysco | Sysco Corp.
By Michael Menzhuber, J.D., LL.M.
The European Commission (EC) has approved under the European Union (EU) merger regulation the proposed acquisition of Brakes Group, the largest U.K. food distributor, by Sysco, the largest U.S. food distributor, the agency announced today.
Both Brakes and Sysco deliver a broad variety of chilled, frozen, and ambient food across all product categories and across all segments of the foodservice industry. Their activities are focused on "delivered wholesale" distribution which means that they purchase food from manufacturers, stock it in warehouses, and sell it on to the foodservice customers.
Sysco carries out its activities in the European Economic Area (EEA) mainly through its subsidiary, Pallas, which is active in Ireland. Although Brakes’s business is mainly focused in the United Kingdom, France, and Sweden, it also sells in the Republic of Ireland.
The EC concluded that the proposed acquisition would not raise competition concerns, in particular, because:
several full range distributors able to supply national independent customers on the island of Ireland will remain active in the market after the takeover;
it is not difficult for competitors to expand to other geographic areas by opening new warehouses at a relatively low cost;
specialist distributors can exert a competitive constraint on full range distributors in their areas of specialty;
Sysco and Brakes are not particularly close competitors in terms of bidding for public and private contracts;
national customers, who tend to award contracts through a bidding process, are able to switch once a new tender is launched; and
independent customers confirmed that it was relatively easy to switch to other distributors;
The EC further concluded that concerns that the merged entity could shut out competitors by forcing certain specialist food manufacturers to enter in exclusive arrangements were unlikely to materialize because the proposed acquisition would not increase Sysco’s spending power on food purchasing to the extent that it would change its ability or incentives to shut out other players.
Companies: Brakes Group; Sysco Corp.
News: AcquisitionsMergers Antitrust