The CMA has accepted the request, which follows on from an unscheduled trading update in which ABF downwardly revised its expected guidance for the year, forecasting a drop in year-on-year performance.
The move means that the CMA will now have until 24 June to reach a verdict. The original phase 1 deadline had been set for 19 February, with the fast tracking to phase 2 potentially bringing the process forward by as much as six weeks.
ABF and Hovis’ joint request no doubt reflects an implicit acknowledgement that a phase 2 investigation of the proposed merger was likely, and illustrates a combined urgent desire to get the deal over the line as soon as possible, as Julian Wilde, head of corporate finance at Wilkin Chapman Rollits points out: “The bread market is highly competitive with slim margins, adversely affecting both ABF and Hovis. This is a deal they both need and the sooner the better.”
In an official communication this morning (8 January), the CMA pointed out that the joint request for the phase 2 investigation meant that ABF and Hovis were under no obligation to concede that the merger could reduce competition in the UK pre-packaged bread and bakery goods market.
A spokesperson for the CMA said: “We have accepted ABF and Hovis’ request to fast-track our investigation into their merger to an in-depth phase 2 inquiry, allowing the CMA to move at pace to an examination of the evidence by an independent inquiry group of experts.
“Today’s step does not involve formal findings on any competition issues, and we will carry forward evidence gathered to date, with opportunities for further engagement and consultation during phase 2.”
Businesses do not have to concede this under the new procedure when a case is fast-tracked. The members of the independent inquiry group will be announced shortly alongside the publication of an indicative administrative timetable.
Responding to the CMA’s announcement, an ABF spokesperson added: “This transaction will deliver a sustainable, profitable bakery business that can invest in innovation and be a far more effective competitor to the benefit of consumers.
“Our priority is to achieve regulatory clearance as efficiently as possible and we are pleased to have agreed with the CMA that we will fast-track to the in-depth and detailed final phase of their merger review. We will continue to work constructively with the CMA to demonstrate the benefits of the transaction.”
