Cargill's Degussa Acquisition Put Under Scrutiny
The European Commission said it saw possible competition problems because the two companies are among four leading suppliers of lecithin, a natural emulsifier used to make a wide range of foods.
15/12/05 Cargill’s acquisition of Degussa’s Food Ingredients Division will go under intense scrutiny as the European Commission raises doubts over competition in lecithin. The European Commission said it saw possible competition problems because the two companies are among four leading suppliers of lecithin, a natural emulsifier used to make a wide range of foods. The Commission has therefore opened an in-depth investigation into the 540 million euro planned acquisition by the US-based Cargill group of the food ingredients business of Germany's Degussa AG, which was approved in the US recently.
The Commission now has until 3 May 2006 to take a final decision on whether the concentration would significantly impede effective competition within the European Economic Area (EEA) or a substantial part of it. The Commission’s preliminary market investigation has shown that the transaction would lead to highly concentrated lecithin markets while reducing further the choice of suppliers for food manufacturers. At the same time, there are barriers to entry on these markets due to the importance the food industry attaches to the reliability of a high quality and on-time delivery of food ingredients.
"This takeover involves two companies that are at the forefront of the production of natural emulsifiers used in particular in food products such as chocolate, bread and margarine," said EU Competition Commissioner Neelie Kroes. "The Commission must ensure that this operation will not detrimentally affect customers like food manufacturers and, consequently, European consumers", Kroes said.
The deal would be Cargill‘s biggest acquisition since 2002, when it bought starches and sweeteners producer Cerestar.
