Greencore’s Bakkavor takeover faces competition concerns over supermarket sauces

The competition watchdog has cautioned that food manufacturer Greencore’s takeover of rival Bakkavor could result in the “substantial lessening of competition” for the supply of chilled supermarket sauces.

It came as the Competition and Markets Authority (CMA) concluded an initial phase one investigation into the £1.2 billion deal.

The regulator said it did not have competition concerns regarding the vast majority of the companies’ operations.

However, the CMA said the deal could face a more thorough phase two probe unless the companies offer a solution to address its concerns.

The combined group caused by the merger of the two firms would create one of the largest supermarket suppliers for own-label chilled sauces, the watchdog said in its initial report.

It added that only two rivals, Two Sisters Food Group and Billington Foods, would provide “material” competition, but said they are both “weaker”.

Nevertheless, the regulator cleared the move in relation to the chilled ready meals and own-label salads markets, where it indicated there was sufficient competition.

Greencore and Bakkavor have said they will work with the CMA in a bid to address its concerns and secure approval for the deal.

The companies still hope to complete the deal by “early 2026”.

Dalton Philips, chief executive of Greencore, said: “The CMA process has been constructive and the phase one decision is a welcome one, confirming our view of the highly complementary nature of our businesses and product portfolios across ‘food for now’ and ‘food for later’.

“I am really grateful to my colleagues at Greencore and Bakkavor in successfully getting us to this point and we are now working with the CMA and Bakkavor for the benefit of all our stakeholders to complete the Bakkavor transaction early next year.”

Mike Edwards, chief executive of Bakkavor, said: “Today’s positive news from the CMA is a significant step forward in the process, providing welcome clarity which means we can collectively work at pace and stay on track to complete the transaction in early 2026.

“Bakkavor is in great shape and we remain excited about joining the Greencore business and unlocking all the associated benefits we have highlighted for colleagues, customers and shareholders.”

Russ Mould, investment director at AJ Bell, said: “While the CMA seems to be largely relaxed about the merger between Bakkavor and Greencore, the slight issue flagged about own label chilled sauces has caused a touch of market disquiet.

“Given these operations account for a slim percentage of revenues across any combination, coming to an arrangement with the competition authority should not prove too difficult.

“However, it could still push the timetable for completing the transaction out a little.”

Greencore shares moved 1.6% lower in early trading on Monday.