Chiquita Bananas and Fyffes announced their proposed merger this week: a £660 million deal that will create the biggest banana business in the world, with an approximate 15% share of supply.
There are currently four major players in the global banana business (which is worth US$7 billion): Chiquita; Del Monte; Dole; and Fyffes. Fyffes is the #4 supplier by some margin with the other three pretty evenly matched. Chiquita and Fyffes will together sell 180 million boxes of bananas a year, versus 117 million for Del Monte and 110 for Dole.
The deal raises some interesting issues:
- 4 to 3 mergers generally do not raise serious competition concerns where it is the #4 and #3 placed suppliers that are getting together to create a stronger #3. Here (at least at a global level) it is the #4 and the #1 suppliers that are getting together to create a stronger #1. However, it is reported that the businesses are geographically complementary, so the parties do not foresee regulatory merger control problems.
- In the EU, the transaction does not meet the financial thresholds to trigger automatic application of the EU Merger Regulation. However, it is likely to qualify for review in a number of Member States including: the UK; Germany; Poland; The Netherlands and Ireland. This means that the parties may themselves request that the transaction be reviewed by the European Commission (under Article 4(5) of the EU Merger Regulation parties can request 'referral up' when a transaction qualifies for review in at least three Member States). If geographic complementarity (as opposed to overlap) between the parties' businesses extends to national level in the EU, then it is unlikely that the parties will wish to see the transaction referred up to Brussels. However, under Article 22, one or more Member State authorities can request the EU Commission to examine a transaction which does not meet the financial thresholds but affects trade between Member States.
- Bananas will be treated as a market separate from other fruit. In the United Brands dominance case, the EU Commission found that bananas had "certain characteristics, appearance, taste, softness, seedlessness, easy handling, and a constant level of production" that distinguished them from other fruits and meant that they satisfied the constant needs of an important section of the population consisting of "the very young, the old and the sick".
- There have been two major EU banana cartel investigations (in 2008 - northern EU and 2011 -Southern EU). In both cases, Chiquita was the whistleblower and received immunity from fines. Those investigations may have flushed out potential hidden liabilities for previous antitrust infringements as regards bananas, but markets for homogeneous products with a limited number of suppliers tend to be risky and the parties also supply other fresh fruit products.
If you would like to discuss these issues, please do not hesitate to contact us.