The Competition Bureau has announced that it would not oppose the acquisitions of western Canada’s two largest hog producers Big Sky Farms by Olymel and the Puratone Corporation by Maple Leaf Foods, according to a report by Global News (www.globalmeatnews.com).
Canada’s Competition Bureau is an independent law enforcement agency that ensures businesses and consumers are protected in the marketplace.
The bureau said it conducted separate investigations into the two vertical mergers, considering whether they would enable the processors to reduce competition on the pork market by hindering rivals’ access to live hogs in upstream markets (input foreclosure) or limit or cease their purchases of live hogs from upstream rivals (customer foreclosure).
It concluded that while the vertical mergers would give packers Olymel and Maple Leaf the ability to foreclose rivals’ access to live hogs, there was unlikely to be a “substantial” lessening of competition, pointing out that Maple Leaf and Olymel would continue to provide competition with each other. It also determined the acquisitions would be unlikely to encourage the two processors to buy fewer hogs from upstream rivals, because the costs associated with this strategy would make it unprofitable.
“The Bureau therefore concluded that it was unlikely that either transaction would result in a substantial lessening or prevention of competition through customer foreclosure,”it said in a statement.
Olymel entered into an agreement to acquire Big Sky Farms – Western Canada’s largest pork producer – on Oct. 16, 2012 for $62.25 million Canadian, shortly after the producer went into receivership with almost $69 million in debt.
Maple Leaf Foods announced the acquisition of the Puratone Corporation – the second-largest pork producer in Western Canada – on Nov. 1, 2012. Puratone was also in serious financial trouble, and had filed for protection under the Companies’ Creditors Arrangement Act.