The Competition and Markets Authority (CMA) has said it is satisfied with Welbilt’s plan to divest its ice machine business in order to get its mega-merger with Ali Group over the line.
Last month, the watchdog said it had “cause for concern” that the deal could create competition issues due to their combined share of the commercial ice machine market.
It warned that removal of Welbilt as an independent competitor could lead to higher prices or a lower quality service for the hospitality sector.
But it has now agreed that Welbilt’s proposal to divest its £220m-a-year global ice machine business to water solutions specialist Pentair would result in a “substantial lessening” of competition within the UK.
“The CMA currently considers that the acquisition by Pentair of the divestment business would remedy, mitigate or prevent the SLCs (substantial lessening of competition) concerned and any adverse effect resulting from them, achieving as comprehensive solution as is reasonable and practicable,” it stated.
“This is because it would allow the divestment business to compete in the supply of ice machines, fully replacing the competitive constraint provided by Welbilt.”
Pentair has agreed to pay $1.6 billion (£1.2 billion) for the business, which includes the Manitowoc and Koolaire ice machine brands.
It will gain primary manufacturing facilities in the USA, Mexico and China, as well as intangible assets, such as intellectual property rights.
One of the CMA’s conditions for approving the remedy proposals was that Pentair could demonstrate that it has the financial resources, expertise and incentive to maintain and develop Welbilt’s ice machine business as a “viable and active competitive entity”.
It revealed that Pentair had subsequently provided it with evidence of its financial resources and debt funding arrangement to complete the acquisition and “detailed” plans to integrate, maintain and develop the business.
“On this basis, the CMA considers that Pentair has the appropriate managerial, operational and technical expertise to operate the divestment business as an effective competitor in the supply of ice machines,” it stated.