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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.