Sun. Jul 3rd, 2022

Brussels,  17 June 2022

The European Commission has approved, under the EU Merger Regulation, the proposed acquisition of Welbilt by Ali Group. The approval is conditional on full compliance with commitments offered by Ali Group.

Executive Vice-President Margrethe Vestager, in charge of competition policy, said:

Ali Group and Welbilt are leading global suppliers of ice-making machines used in the hospitality and industrial sectors. At the time of spiking inflation, it is important that all inputs to the food supply chain remain at competitive prices. The commitments offered in this case make sure that a new player on the market will continue to exert competitive pressure on the merged entity while customers will preserve choice of suppliers.

Ali Group and Welbilt are active in the designing, manufacturing, marketing and servicing of foodservice equipment, such as ice-making machines, ovens, fryers and grills used in commercial and public venues. They are leaders in the European Economic Area (‘EEA’) market for ice-making machines. Ice-making machines are used to produce ice for companies operating in foodservice sector, like in restaurants or hotels, but also for specific industrial applications, such as cement production.

The Commission’s investigation

Following the transaction, the combined entity would become the largest manufacturer and supplier of ice-making machines in the EEA and would have faced limited competitive pressure from competitors. In addition, it was unlikely that a new player would step in, absent the commitments. This is because of high barriers to access the market due to brand loyalty and the importance of local after-sales services.

The proposed remedies

Following extensive discussions with the Commission during the pre-notification phase, and to ascertain that the business would be viable in the long run, the parties ultimately decided to divest the entirety of Welbilt’s global ice-making machine business, including three manufacturing facilities in China, Mexico and the US. The business operates primarily under the Manitowoc and Koolaire brands.

Following the market test, the Commission concluded that the transaction, as modified by the commitments, would no longer raise competition concerns. This is because the commitments consist of the divestiture of a stand-alone business, which fully removes the overlap between the parties’ activities. This will enable a purchaser to have all the assets to run the divestment business as a viable competitive force in the market on a lasting basis. The parties proposed to divest the business to Pentair plc, a US based manufacturer of water treatment systems for a wide range of applications. The Commission will formalise its conclusions on the purchaser in a separate buyer approval process.

The Commission’s decision is conditional upon full compliance with the commitments.

Companies and products

Ali Group, headquartered in Italy, through its subsidiaries, designs, manufactures, markets and services a broad range of commercial foodservice equipment, including ice-making machines and ovens, used in major commercial and public venues.

Welbilt, headquartered in the US, offers equipment capable of storing, cooking, holding, displaying, dispersing and serving food and beverage products. It designs, manufactures and supplies equipment used by commercial and institutional service operators, such as ice-making machines and ovens.

Merger control rules and procedures

The transaction was notified to the Commission on 28 April 2022.

The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it. The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II). If commitments are proposed in Phase I, the Commission has 10 additional working days, bringing the total duration of a Phase I case to 35 working days, such as in this case.

Throughout its investigation, the Commission had exchanges and cooperated with the US Department of Justice, and the UK Competition and Markets Authority.

More information will be available on the Commission’s competition website, in the public case register under the case number M.10431.

Source – EU Commission