Concerns raised over impact of Sysco/Brakes deal on food sector
A $3bn (€2.7bn) merger between food services groups Sysco and Brakes was cleared by the European Commission, despite concerns raised over its impact on Irish food manufacturers.
The merger affects operations in the UK, France Sweden and Spain, but the EC’s investigation focused on the impact on the food services sector in Ireland.
Sysco, which owns Pallas Foods in Ireland, is the biggest supplier to the Irish restaurant and catering trade, while Brakes is the third biggest food services supplier in the country.
According to a recently published detailed ruling from the European Commission, concerns were raised during the investigation into the groups’ Irish operations “that the merged entity could shut out competitors by forcing certain specialist food manufacturers to enter into exclusive arrangements”.
It said the main competitors in Ireland were Musgrave, BWG, Henderson and Lynas.
One competitor and one customer raised concerns regarding possible exclusive supply arrangements after the completion of the transaction.
The respondents cited one such existing agreement, details of which were redacted in the published EC ruling.
A competitor claimed that “given the increased financial power, the combined entity would be in a better position to negotiate better deals with food manufacturers and therefore force existing competitors out of the market.”
However, the Commission concluded that these concerns were unlikely to materialise, because the proposed acquisition would not increase Sysco’s spending power on food purchasing to the extent that it would change its ability to shut out other players.
The Commission’s investigation showed that several full-range distributors that are able to supply national and independent customers on the island of Ireland will remain active in the market after the takeover.
Data submitted by the companies also showed that Sysco and Brakes are not particularly close competitors in terms of bidding for public and private contracts.
Brakes has 330 staff in Ireland, while Sysco employs 960 at its Pallas and Keelings businesses here.
Bain Capital, a private equity company, sold London-based Brakes to Sysco after pulling a planned IPO earlier this year.
Sysco bought Pallas from the Geary family in 2009 for nearly €200m.
In 2012, Sysco bought Farm Fresh, the catering supplies division of Keelings, and Crossgar Foodservice in Northern Ireland.