European Union competition officials have opened an in-depth probe into Unilever’s proposed €1.27bn purchase of Sara Lee’s personal care business.
The move, announced formally on Tuesday, comes after days of speculation in Brussels that the deal had run into potential problems in some areas and that a deeper investigation was likely.
On Tuesday, officials at the European Commission said that the potential competition concerns centred on “several product markets, including deodorants, skin cleansing and fabric care products”.
“This merger creates significant overlaps in a number of products used by consumers on an everyday basis. We need to make sure that if there are competition concerns, they are duly addressed,” said Joaquín Almunia, EU competition commissioner.
The deal would give Unilever control of Sara Lee brands such as Sanex, as well as Zwitsal in the Netherlands and Duschdas in Germany. The Anglo-Dutch multinational already owns skin care brands such as Lifebuoy soaps and Dove deodorants.
Part of the rationale for the deal was Unilever’s desire to increase its exposure to cheaper-priced products, with most of the Sara Lee products being in the “value” or middle-tier range.
US-based Sara Lee decided to sell the personal care and household business last year as part of its strategy to reorganise itself into a smaller and more focused company. The deal with Unilever was announced in September.
The move by EU officials to a second-stage – or in-depth – probe means Brussels now has until October 5 to decide whether or not to allow the deal.
The European Commission, the EU competition watchdog, said on Tuesday that it would decide by October 5 whether to clear or block the $1.3bn deal. Its previous deadline was May 31.
Unilever shares were down 1.5 per cent to £18.40 by early morning trading in London versus a 1 per cent fall in the Stoxx Europe 600 food and beverage index.
Unilever said last week it expected regulators to take a closer look that would delay the asset purchase to the fourth quarter of 2010 from a previous third-quarter target.
Sara Lee said an extended investigation would delay some share buy-backs.
Bertold Bar-Bouyssiere, an antitrust lawyer at DLA Piper, said an in-depth investigation would not necessarily mean bad news for Unilever.
“There have been several cases where investigations have been terminated, sometimes even without a statement of objections. When there are overlaps, competition concerns could be fixed with divestments, which can be done in phase two,” he said.
The EU executive unconditionally cleared Oracle Corp’s $7bn takeover of Sun Microsystems in January after an in-depth investigation.