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The UK’s competition authority has found that Refresco’s acquisition of Cott Corporation’s soft drinks business could lead to higher prices for supermarkets and consumers.

The Competition and Markets Authority (CMA) has carried out an initial investigation into Refresco’s proposed $1.25 billion purchase of Cott’s beverage unit, which would create the largest independent bottler in Europe and North America with a combined production volume of approximately 12 billion litres.

An initial investigation into the merger did not find any competition concerns for the majority of these products. However, both companies supply juice drinks using a special aseptic production process that allows them to be sold preservative-free and without refrigeration.

Only one other competitor in the UK currently supplies third parties with juice drinks using this production process. The CMA said it is therefore concerned that, after the merger, the combined business might be able to increase prices or lower quality standards.

CMA acting executive director Rachel Merelie said: “These companies supply well-known UK shops and brands with soft drinks, who in turn sell these to thousands of people daily. It is therefore important that we address any issues to ensure that shoppers do not lose out.

“We have looked at all aspects of this merger and have concerns that the merger could lead to reduced competition in the manufacturing and packaging of certain juice drinks. This may result in higher prices or quality standards slipping for stores and brands, with potential knock-on effects to end consumers.”

Refresco said this morning it is “willing to offer suitable remedies” and will fully cooperate with the CMA to address the concerns raised.

The company highlighted that the initial CMA investigation did not find any competition concerns for most of its products.

Refresco CEO Hans Roelofs added: “With the clearance we received earlier in the process from the US and Canadian regulatory authorities and the overwhelming support from our shareholders, we are willing to propose remedies to the CMA to address this specific issue and put us on the right track to also obtain clearance in the UK.

“We continue to cooperate with the CMA in order to progress the acquisition and work towards a successful completion.”

That was echoed by Cott chief executive officer Jerry Fowden, who said: “Other than the one product category produced by both Cott and Refresco, the CMA did not find any other competition concerns. With clearance already received from the US and Canadian regulatory authorities, as well as overwhelming support from Refresco’s shareholders, Refresco, in consultation with Cott, is willing to propose remedies to the CMA to address their concerns.”

The purchase was announced last July and is a move by Refresco to increase its access to the North American market.

Cott’s products span categories such as carbonates, energy drinks, bottled water and shelf-stable juices. It owns 19 production sites in the US, four in Canada, one in Mexico and five in the UK.

Netherlands-based Refresco expects to see resulting synergies of around €47 million by the third year after completion of the deal.

The CMA said it will now refer the merger for an in-depth investigation unless Refresco offers acceptable undertakings to address competition concerns.

Source: FoodBev