By Yadarisa Shabong
Nov 11 (Reuters) - Britain's competition watchdog told consumer goods group Unilever and US spice maker McCormick they must address competition concerns in recipe mixes and sauces or face an in-depth investigation of their planned $65 billion food deal.
The Competition and Markets Authority said on Wednesday the companies could offer remedies before a November 18 deadline to avoid a detailed investigation.
An in-depth review can result in a deal being cleared, cleared subject to
remedies such as asset sales, or blocked.
Unilever said in March it would combine its food business with Frank's RedHot and French's mustard maker McCormick to create a company worth around $65 billion in the second-largest food sector deal on record.
McCormick's UK consumer business includes herbs, spices and sauces sold under the Schwartz brand, while Unilever sells a range of food products including dry sauces and meal mixes under the Knorr, Maille and Colman's brands.
Following an initial review, the CMA said it was concerned the deal could reduce competition in the supply of dry ingredient mixes, such as chilli con carne mixes, and dry sauces, such as parsley sauce, to UK retailers.
The regulator said Nestle's Maggi, Premier Foods' Bisto and supermarket own-brands provide only limited competition in these markets.
"This is an expected step in the regulatory process, and we are working constructively with the CMA on a suitable remedy," a Unilever spokesperson said. McCormick also said it was working constructively with the CMA.
Under CEO Fernando Fernandez, Unilever is reshaping its portfolio to focus on faster-growing personal care and beauty businesses. It spun off its ice cream business last year.
MUSTARD MAKES THE CUT
The CMA said English, French and American-style mustard are separate markets because shoppers do not view them as close substitutes. It therefore found no competition concerns from the combination of McCormick's French's brand with Unilever's Colman's and Maille mustards.
Unilever said it had already decided to sell the Colman's brand, which also makes mint sauce and recipe mixes, to "proactively" address potential competition concerns and that talks with potential buyers were progressing well.
"The reason Unilever was looking at selling Colman's was always for antitrust reasons, so now that it isn't an area of concern for the CMA, it probably doesn't get sold," said Quilter Cheviot analyst Chris Beckett.
Instead, Beckett said McCormick's Schwartz products in the UK could be part of a remedy package.
"More broadly, we continue to make good progress on regulatory approvals globally, reinforcing our confidence in a timely closing," a spokesperson for McCormick said.
The deal cleared a key US regulatory hurdle on October 5 when it was granted approval under the Hart-Scott-Rodino Act, Federal Trade Commission records show.
Unilever's shares were little changed and McCormick's shares were down 2.1% at 1438 GMT.
Separately, the CMA on Wednesday raised concerns about Dulux paint maker AkzoNobel and US peer Axalta's proposed $25 billion merger in the UK vehicle refinish coatings market, giving the companies a week to offer remedies or face a deeper investigation.
(Reporting by Yadarisa Shabong in Bengaluru. Additional reporting by Tuhina and Juveria Tabassum. Editing by Nivedita Bhattacharjee and Mark Potter)
