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NZ Commission Explains its Rejection of Brinks Takeover

by 5m Editor
9 January 2009, at 10:49am

NEW ZEALAND - The Commerce Commission has explained why it declined to allow Tegel Foods Limited to acquire its rival, Brinks (including P.H. Van den Brink Limited, VDB Industries Limited, Brinks South Island Limited, Southland VDB Limited and BAT Promotions Limited).

The Commerce Commission explained that Tegel is a poultry growing and processing company with its own breeding stock, hatcheries, feed mills, processing, distribution and manufacturing facilities throughout New Zealand. The company supplies fresh and frozen chicken meat and processed chicken meat products to supermarkets, the food service segment and quick service restaurant outlets throughout NZ.

Brinks' business involves growing and processing poultry. The company is not vertically integrated. Brinks supplies fresh and frozen chicken meat and processed chicken meat products primarily to supermarkets and the food service segment throughout NZ.

In May, the Commerce Commission declined to grant clearance for Tegel to acquire P H Van den Brink Limited, VDB Industries Limited, Brinks South Island Limited, Southland VDB Limited, and BAT Promotions Limited. This week it published its reasons in an 80-page document.

Commerce Commission chair, Paula Rebstock said the Commission could not be satisfied that the proposed acquisition would not have or be likely to have the effect of substantially lessening competition in four markets. Those markets are for the processing and wholesale supply of chicken meat products to:

  • supermarkets in the North Island
  • food service providers in the North Island
  • supermarkets in the South Island and
  • food service providers in the South Island.

The proposed acquisition would reduce the number of large chicken processors from three to two in the North Island, and from two to one in the South Island. The commission considered that the proposed acquisition would remove Brinks, a competitor that industry participants described as a price discounting catalyst, from those markets.

Further, the commission considered that the structure and characteristics of this industry post-acquisition would enhance the scope for coordinated behaviour.

Background

On 21 May 2008 the Commerce Commission received an application from Tegel seeking clearance to acquire the chicken business assets of Brinks.

Tegel is a vertically integrated poultry growing and processing company with its own breeding stock, hatcheries, feed mills, processing, distribution and manufacturing facilities throughout New Zealand. The company supplies fresh and frozen chicken meat and processed chicken meat products to supermarkets, the food service segment and quick service restaurant outlets throughout New Zealand.

Brinks’ business involves growing and processing poultry. The company is not vertically integrated. Brinks supplies fresh and frozen chicken meat and processed chicken meat products primarily to supermarkets and the food service segment throughout New Zealand.

The food service segment includes further preparers, distributors and retailers other than supermarkets. Chicken meat products include whole dressed chickens and cut up pieces.

Further Reading

- Go to our previous news item on this story by clicking here.