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Britain's competition authority announced Tuesday it has approved Tate & Lyle's planned acquisition of sugar producer Tereos' U.K. business. The decision was influenced by the risk that Tereos' struggling unit could shut down without the deal, which would reduce competition in the industry.

The Competition and Markets Authority (CMA) raised concerns that the acquisition by T&L Sugars Ltd., operating as Tate & Lyle, might lead to fewer companies dominating the U.K. sugar market. However, the CMA noted that if the transaction were blocked, the Tereos unit might collapse, reducing competition regardless.

Richard Feasey, chair of the independent inquiry group leading the CMA's in-depth phase two probe, stated that the watchdog had determined that the transaction was preferable to no deal at all. "Having reviewed a wide range of evidence — including detailed financial information on Tereos' U.K. retail business and the efforts they have taken to try and improve its performance — we believe that the right outcome is to clear this deal," Feasey said.

Tate & Lyle Sugar Biz Deal : Background and Concerns

T&L Sugars, which refines and distributes sugar from London under the Tate & Lyle brand, announced its intention to purchase the U.K. business of France-based agricultural giant Tereos in November. The financial details of the Tate & Lyle sugar business deal have not been disclosed.

In March, the CMA warned that the acquisition could significantly harm competition in the U.K. sugar market, potentially leading to higher prices for consumers. The two companies together hold a market share of more than 25% by volume in various segments of the U.K. sugar sector, prompting a closer look under the CMA's supply test.

However, by August, the CMA provisionally cleared Tate & Lyle's acquisition, acknowledging that the potential failure of Tereos' U.K. unit would also result in a loss of competition.

Financial Challenges and Market Impact

Tereos had informed the CMA that its U.K. unit had never been profitable and that it could sell its surplus sugar more profitably in other markets once French demand was met. While the CMA did not disclose Tereos' financial performance publicly, its analysis confirmed that the company's U.K. operations had been consistently loss-making over an extended period.

The Tate & Lyle sugar business deal marks a significant shift in the U.K. sugar industry landscape, with the potential to reshape competition dynamics. Despite initial concerns, the CMA's decision suggests that the benefits of keeping the Tereos unit operational outweigh the risks of reduced competition.