Margrethe Vestager: “It is important that all factors in the food chain’s production remain at competitive prices”
In accordance with the EU Merger Regulation, the European Commission has approved Ali Group’s proposed acquisition of Welbilt. Approval is subject to full compliance with the commitments proposed by Ali Group.
Margrethe Vestager, Executive Vice President in charge of competition policy, said: “Ali Group and Welbilt are the world’s leading suppliers of ice cream machines used in the restaurant and industrial sector. With the current rise in inflation, it is important that all inputs in the food supply chain remain at competitive prices. The commitments proposed in this case ensure that a new entrant in the market will continue to exert competitive pressure on the merged entity and that customers will retain the choice between different suppliers.“.
Ali Group and Welbilt are active in the design, manufacture, marketing and maintenance of catering and food equipment, such as ice machines, ovens, fryers, grills used in commercial and public places. The two companies are market leaders in ice making machines in the European Economic Area (“EEA”). The machines in question are used to make ice cream for companies in the catering sector, such as restaurants or hotels, but also for specific industrial applications, such as the production of cement.
The entity resulting from the proposed transaction would have become the main manufacturer and supplier of most ice cream machines in the EEA and would have been subject to limited competitive pressure from the remaining competitors. Given the high barriers to market entry, due to brand loyalty and the importance of local after-sales services, it would also have been unlikely that a new entrant could have entered the market without commitment.
The proposed corrective actions
After extensive discussions with the Commission during prior notification and to ensure the long – term viability of the business, the parties finally agreed to divest all of Welbilt’s global ice machine business, including three factories in China, Mexico and the United States. This business is operated primarily under the Manitowoc and Koolaire brands.
Following a market test, the Commission concluded that the transaction, as amended by the undertakings, did not give rise to any competition concerns. This is because the commitments consist of the divestiture of a separate company and completely eliminate the overlap between the parties’ companies. The buyer will then have all the assets to operate the divestiture business as a viable competitive force in the market on a lasting basis. The parties have proposed divesting the company to a manufacturer of water treatment systems for a wide range of uses, based in the United States. The Commission will formalize the conclusions on the purchaser in a separate approval procedure.
The Commission’s decision is subject to full compliance with the commitments.
Companies and their products
Headquartered in Italy, Ali Group designs, manufactures, markets, and provides maintenance services for a wide range of commercial catering equipment, including ice making machines and ovens used in large commercial locations and publicly, through its subsidiaries.
US-based Welbilt supplies equipment that can store, prepare, store, display, mix and serve food and beverages. Designs, manufactures and distributes equipment used by commercial and institutional service operators, such as ice cream makers and ovens.
Merger control procedures and rules
The transaction was notified to the Commission on 28 April 2022.
The Commission’s task is to assess mergers and acquisitions involving companies whose turnover exceeds certain thresholds (see Article 1 of the Merger Regulation) and not to approve mergers which could seriously impede competition in the EEA or in a substantial part of it. Most of the notified mergers do not give rise to competition problems and are approved after routine inspection. From the notification of the transaction, the Commission generally has 25 working days to decide whether to approve it (Phase I) or launch an in-depth investigation (Phase II). If Phase I commitments are proposed, the Commission has 10 additional working days and the total duration of Phase I is increased to 35 working days, as in the present case.
During the investigation, the Commission had exchanges and cooperation with the US Department of Justice and the UK Competition and Market Authority.
Further information will be available on the Commission’s competition website in the public case register under number M.10431.