Martijn van de Hel and Paul Breithaupt successfully assisted KU&KU Industries (St. Paul) in obtaining approval from the Autoriteit Consument & Markt (“ACM”) for the acquisition of Royal ERU.
St. Paul is engaged in the production of customised processed cheese products and industrial cheese solutions for customers in the food industry. St. Paul’s cheese solutions are used for filling or as an ingredient in meat products, cheese sauces, cheese snacks and pizza and pasta products. Royal ERU produces and sells processed cheese to customers in the retail and out-of-home channels. Among others, Royal ERU produces various cheese spreads (i.e. Goudkuipje), processed cheese slices and fondue cheese.
On 9 April 2024 the acquisition was notified to the ACM. The ACM approved the acquisition on 23 May 2024.
It is notable that – for the first time in a so-called “shortened decision” – the ACM has elaborated on the market investigation it conducted for the purpose of the acquisition. According to the ACM, these findings may be relevant for future merger assessments. Regarding the acquisition, the ACM makes the following comments in the decision:
“To assess whether the Parties are each other’s competitors, it is relevant whether producers of spreadable and processed cheese for the food industry (including St. Paul) actually exert effective competitive pressure on producers of spreadable and processed cheese for the retail and out-of-home channels (including ERU) and vice versa. Based on the market research, the ACM concludes that such competitive pressure is insufficient. Customers in the food industry cannot easily switch to products for the retail and out-of-home channel and vice versa. Thus, there is no overlap between customer demand from these sales channels.”
“Furthermore, it does not seem easy for food industry producers to produce spreadable or processed cheese for the retail and out-of-home sales channel or vice versa at a short term and with limited costs. This is because the market research shows that different types of machinery are used for each channel, which van only be purchased at relatively high cost. Moreover, it would take several years to set up a new production line.”
“Finally, the ACM’s market research provides indications that producers of processed and spreadable cheese for the food industry and spreadable cheese for the retail and out-of-home channel experience competitive pressure from foreign companies. The same applies to buyers of raw materials for processed and spreadable cheese.”
The press release from St. Paul and Royal ERU on the acquisition can be found here. There was also media coverage of this acquisitions, see here.
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