European Commission Clears Proposed Acquisition of Danone Biscuits by Kraft, Subject to Conditions

To address the Commission's serious doubts, Kraft made the commitment to divest a range of Spanish biscuit brands, such as Artiach, Chiquilin, Filipinos and Marbú Dorada and one of its production plants in Spain.

12/11/07 The European Commission has approved, under the EU Merger Regulation, the proposed acquisition of the worldwide biscuits, snacks and cereals business of Danone of France by the US-based company Kraft. The Commission's decision is conditional upon the divestiture of a range of Spanish biscuit brands, a plant in Spain and a Hungarian chocolate bar brand. In light of these commitments, the Commission has concluded that the transaction would not significantly impede effective competition in the European Economic Area (EEA) or any substantial part of it.

Competition Commissioner Neelie Kroes said "In view of the remedies offered, I am satisfied that competition will remain vigorous after the merger and consumers of biscuits and chocolate will continue to benefit from choice and competitive prices."

Kraft is active worldwide in the manufacture and sale of packaged foods and beverages, in particular snacks, beverages, cheese and dairy products, coffee, chocolate confectionary and biscuits. Danone Biscuits is the global biscuits, snacks and cereals business of the French company Danone.

The proposed transaction would affect only a few Member States where both parties sell biscuits and chocolate confectionary.

As regards biscuits, Danone Biscuits is active in the whole of Europe with its umbrella brand LU as well as other international brands. Kraft sells biscuits primarily in Iberia under the Fontaneda and Artiach brands. The Commission's market investigation revealed that the proposed acquisition, as initially notified, could have significantly reduced competition as regards the Spanish market for sweet biscuits. The Commission found in particular that the merged entity would have become the market leader with the far largest portfolio of must-have brands and an unavoidable trading partner for retailers.

Concerning chocolate confectionary, Danone Biscuits' products include only chocolate bars sold under national brands: Cha-cha in Belgium, Tatranky, Horalky and Fidorka in the Czech Republic and Slovakia and Balaton in Hungary. In turn, Kraft sells chocolate confectionary in various formats throughout the EEA under a range of international brands: Milka, Côte d'Or, Toblerone, Suchard and certain local brands. The originally proposed transaction, creating a market leader and combining a range of strong brands from both parent companies, threatened to impede effective competition in the Hungarian market for chocolate bars.

To address the Commission's serious doubts as to the compatibility of the proposed transaction with the Single Market, Kraft made the commitment to divest a range of Spanish biscuit brands, such as Artiach, Chiquilin, Filipinos and Marbú Dorada and one of its production plants in Spain. With regards to Hungary, Kraft undertook to divest the Balaton brand. After market testing these commitments, the Commission concluded that they would be suitable to remedy the serious doubts.