The competition watchdog has warned that food manufacturer Greencore's acquisition of competitor Bakkavor could lead to the "substantial lessening of competition" for the provision of chilled supermarket sauces.
It came as the Competition and Markets Authority (CMA) wrapped up an initial phase one examination of the £1.2bn deal. The watchdog first announced in July this year plans to scrutinise the transaction between the two food giants.
Greencore is headquartered in Dublin, while London-based Bakkavor has sites across the º£½ÇÊÓƵ including in Somerset, Wiltshire, Aston in the West Midlands, Crewe in Cheshire, Barton in West Lancashire, and across the East of England and the South East.
In its latest announcement, the CMA indicated it held no competition worries regarding the overwhelming majority of the firms' activities.
The CMA said the deal could face a more detailed phase two investigation unless the businesses present a remedy to tackle its reservations.
The merged entity resulting from the union of both companies would establish one of the biggest supermarket suppliers for own-brand chilled sauces, the watchdog noted in its preliminary findings.
It further observed that merely two competitors, Two Sisters Food Group and Billington Foods, would deliver "material" rivalry, though highlighted both are "weaker".
Despite this, the regulator approved the transaction concerning the chilled ready meals and own-brand salads sectors, where it suggested adequate competition existed.
Greencore and Bakkavor have confirmed they will collaborate with the CMA to tackle its reservations and obtain clearance for the transaction.
The firms remain optimistic about finalising 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, added: "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."
Shares in Greencore dipped by 1.6% in early trading on Monday.
