Watchdog probes Heinz-HP sauce buy-up bid

A deal by Heinz for the maker of HP sauce was referred to the competition authorities today amid fears it could lead to higher sauce prices.

The Office of Fair Trading (OFT) said the acquisition of HP Foods could drive up the cost of products such as brown sauce, tomato ketchup and baked beans.

The planned £470m (€690m) deal with Danone, announced in June, would add sauces such as Lea & Perrins, Amoy and Daddies to US giant Heinz’s larder of beans, soups and ketchup.

It would make Heinz the UK’s leading sauce company, with around $300m (€248m) in worldwide sales.

However, the OFT said today there could be a lessening of competition in a number of product areas, including ketchup and brown sauce, tinned baked beans and pasta products.

It said the deal involved two of the largest branded sauce suppliers in the UK.

Vincent Smith, head of competition enforcement at the OFT, said: “As a result of the merger, retail customers and consumers could suffer from less competition resulting in higher prices for products such as HP brown sauce, tomato ketchup and baked beans.”

The OFT refers deals for investigation by the OFT when it believes they could lead to a “substantial lessening of competition”. Less than 6% of mergers are generally referred.

The Competition Commission will now have 24 weeks to publish a report on its findings.

HP Foods, which Danone bought from industrial conglomerate Hanson for £199m (€292m) in 1988, employs around 450 workers at three factories, including at Worcester and Aston Cross, Birmingham.

Heinz operates from five regional centres in the UK and employs more than 5,000 staff. Its largest site is in Wigan and makes beans and soups, while it has factories at Leamington Spa and Westwick producing frozen desserts.

Heinz said in a statement that it would cooperate fully with the Competition Commission.

Jane Miller, head of Heinz UK & Ireland, said: “It is not unusual for acquisitions of this magnitude to be referred to the Competition Commission to ensure that any potential concerns are addressed.

“Heinz is confident that this acquisition will meet the criteria for final clearance. This deal has already received approval from the merger authorities in Ireland and Germany.”