Italy’s competition regulator has conditionally cleared the merger of gelato supplier Sammontana with frozen baked goods business Forno d’Asolo.
The Autorità Garante della Concorrenza e del Mercato (AGCM), which blocked the business combination in May, said on Friday (26 July) it is willing to let the transaction proceed on the basis an operation in the frozen baked goods segment is sold.
That essentially refers to Forno d’Asolo, while on the other side of the equation, the AGCM suggested Sammontana exit gelato supply contracts with Froneri, the ice-cream business partially owned by Nestlé.
A merger agreement was initially announced in February, when the Bagnoli family, the founders of Sammontana, said they had partnered with investment management group Investindustrial to buy Forno d’Asolo from private-equity firm BC Partners.
The family, Investindustrial and the management team would own 100% of the new group.
However, the AGCM blocked and suspended the deal in May amid concerns it would snuff out competition in the frozen breakfast bakery products area, as the merger would create a business much larger than any smaller competitors.
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The regulator also had similar concerns with respect to ice cream and has now concluded an investigation that would allow the merger to go ahead.
“The measures consist of the divestment, in favour of a competing operator, of a company already independently active on the market, which has its own production plants, distribution capacity and established brands, and a commitment not to acquire companies active in the distribution of bakery products in Italy, nor companies active in the production and marketing of bakery products for breakfast in Italy with a significant turnover,” the AGCM explained in a statement on Friday.
A second condition is that the merger companies “transfer the current concession contracts” between Forno d’Asolo and Froneri/Nestlé in Italy for the distribution of ice cream and bakery breakfast products.
The AGCM added that there needs to be “the possibility for the successor to use Forno d’Asolo’s agents for the sale of the products covered by the concession (frozen bakery products and ice cream) without any obstacle”.
A third condition has also been imposed for the bakery products concerned in locations in Italy where the merged entity group would have the greatest distribution advantage over competitors.
These regions are Friuli Venezia Giulia, Trentino Alto Adige, Veneto, Tuscany, Sardinia, Sicily, Calabria and Basilicata.
The AGCM explained the technicalities of that proviso: “The Authority has imposed – for a period of five years extendable by a further five years – measures to eliminate or not provide for exclusivity for the sale of bakery products for the former frozen breakfast with the agents and logistics operators of the parties.
“This allows competitors to use this distribution capacity for frozen breakfast products (and other bakery products, if sold together) to counter the increased market power of the companies involved.”
Just Food has asked London-based InvestIndustrial, on the side of Sammontana, and Forno d’Asolo, how they plan to respond or react to the AGCM’s orders, whether they will be carried out or whether the parties will renegade on the transaction.
The deal was to be conducted via the private investor’s Frozen Investments fund to combine Sammontana with the FdA Group, or Forno d’Asolo.
Forno d’Asolo generated around €500m ($536.6m) in sales in 2023 and EBITDA of more than €85m, BC Partners said in February.
At the same time, InvestIndustrial said the combined group would have around €1bn in revenues, with production facilities across Italy, the US and France serving frozen pastries, desserts and gelato products to bars, restaurants, hotels, food retailers and catering companies.
Sammontana, founded in 1946, operates three production plants in Italy and has around 1,000 employees, as well as a network of over 200 dealers and distributors.
The AGCM revealed the findings of its competition probe in Friday’s statement: “The investigation carried out by the Authority made it possible to ascertain the existence of a national market for frozen bakery breakfast products, in the foodservice channel, distinct from both fresh products and other types of bakery products (pastry, bakery, savoury snacks).
“It emerged that in this market the merger can produce significant anti-competitive effects because it eliminates the competitive link between the two main operators.
“The analyses also showed that the transaction would have led to significant incentives to increase the prices of frozen breakfast products in the absence of sufficiently high competitive pressure from other companies.”
