Completed acquisition by Origin UK Operations Limited of assets comprising the business of Bunn Fertiliser Limited Undertakings given by Origin UK Operations Limited to the Competition and Markets Authority pursuant to section 73 of the Enterprise Act ...
Completed acquisition by Origin UK Operations Limited of assets comprising the business of Bunn Fertiliser Limited
Undertakings given by Origin UK Operations Limited to the Competition and Markets Authority pursuant to section 73 of the Enterprise Act 2002
Whereas:
(a) On 10 August 2017 Origin UK Operations Limited ("Origin") acquired certain assets comprising the business of Bunn Fertiliser Limited ("Bunn") (the "Transaction") by way of an asset purchase agreement, such that Origin and Bunn ceased to be distinct for the purposes of the Enterprise Act 2002 (the "Act");
(b) In its decision of 14 July 2017 (the "Decision"), the Competition and Markets Authority (the "CMA") decided under section 33(1) of the Act that the Transaction gives rise to a realistic prospect of a substantial lessening of competition in the supply of fertilisers within 150 miles of each of the sites operated by Origin and Bunn in Montrose, Scotland. The CMA did not find competition concerns in relation to any of the other overlaps;
(c) Under section 33(1) of the Act the CMA has a duty to refer a relevant merger situation for a Phase 2 investigation where it believes that it is or may be the case that the creation of that merger situation may be expected to result in a substantial lessening of competition within any market or markets in the UK for goods or services;
(d) Under section 73 of the Act the CMA may, instead of making such a reference and for the purpose of remedying, mitigating or preventing the substantial lessening of competition concerned or any adverse effect which has or may have resulted from it or may be expected to result from it, accept undertakings to take such action as it considers appropriate, from such of the parties concerned as it considers appropriate. In particular, the CMA shall have regard to the need to achieve as comprehensive a solution as is reasonable and practicable to the substantial lessening of competition and any adverse effects resulting from it;
(e) As set out in the Decision, the CMA believes that, in the absence of appropriate undertakings, it would be under a duty to refer the Transaction for a Phase 2 investigation;
(f) The CMA considers that the undertakings given below by Origin are appropriate to remedy, mitigate or prevent the substantial lessening of competition, or any adverse effect which has or may have resulted from the Transaction, or may be expected to result from it, as specified in the Decision;
(g) Prior to the acceptance of these undertakings by the CMA, Origin entered into a legally binding agreement of 13 October 2017 to divest the Divestment Business as a going concern to a Proposed Purchaser on terms approved by the CMA. This agreement was conditional only on formal CMA approval of the Proposed Purchaser and acceptance by the CMA of these undertakings. This agreement includes a warranty that the Proposed Purchaser has the financial resources, expertise (including the managerial, operational and technical capability), incentive and intention to maintain and operate the Divestment Business as part of a viable and active business in competition with Origin and other competitors in the supply of fertilisers in the central/eastern region of Scotland; and
(h) The CMA made an Initial Enforcement Order applying to Origin Enterprises plc and Origin on 10 August 2017 in respect of the Transaction pursuant to section 72 of the Act for the purposes of preventing pre-emptive action. Pursuant to section 72(6)(b) of the Act, this Initial Enforcement Order ceases to be in force on the acceptance by the CMA of the undertakings given below by Origin.
NOW THEREFORE Origin hereby gives to the CMA the following undertakings for the purpose of remedying, mitigating or preventing the substantial lessening of competition, or any adverse effect which has or may have resulted from it or may be expected to result from it.
1 EFFECTIVE DATE OF THE UNDERTAKINGS
1.1 These undertakings shall take effect from the date that, having been signed by Origin, they are accepted by the CMA.
2 DIVESTMENT OF THE DIVESTMENT BUSINESS
2.2 Origin shall use all reasonable endeavours to ensure the transfer of Key Staff with the divestment of the Divestment Business.
2.3 In the event that Origin fails to complete the divestment of the Divestment Business in accordance with paragraphs 2.1 and 2.2 above, the CMA may, whether or not initiating the Trustee Functions as set out in paragraph 4 below, require Origin to divest the Divestment Business as a going concern at no minimum price to a purchaser or purchasers approved by the CMA.
3 APPROVAL OF PURCHASER AND TERMS OF DIVESTMENT
(a) the acquisition by the Proposed Purchaser of the Divestment Business, on the terms set out above, remedies, mitigates or prevents the substantial lessening of competition concerned or any adverse effect which has or may have resulted from it, or may be expected to result from it, in particular having regard to the need to achieve as comprehensive a solution as is reasonable and practicable to the substantial lessening of competition and any adverse effects resulting from it;
(b) the Proposed Purchaser is independent of and unconnected to Origin and the Group of Interconnected Bodies Corporate to which Origin belongs and any Associated Person or Affiliate of Origin or such Group of Interconnected Bodies Corporate;
(c) the Proposed Purchaser has the financial resources, expertise (including the managerial, operational and technical capability), incentive and intention to maintain and operate the Divestment Business as a viable and active business in competition with Origin and other competitors in the supply of fertilisers in the central/eastern region of Scotland from the date of completion of the divestment of the Divestment Business;
(d) the Proposed Purchaser is reasonably to be expected to obtain all necessary approvals, licences and consents from any regulatory or other authority, including (where applicable) landlord’s consent to the transfer of any leasehold interest; and
(e) the acquisition by the Proposed Purchaser of the Divestment Business does not create a realistic prospect of a substantial lessening of competition within any market or markets in the UK.
4 APPOINTMENT OF A TRUSTEE
4.1 The provisions of paragraph 4.2 to paragraph 4.7 below shall apply only as long as Origin has not satisfied, or where the CMA has reasonable grounds for believing that Origin will not satisfy, all or any part of the obligation to divest the Divestment Business in accordance with paragraph 2.1 above.
(a) the names of at least two individuals to exercise the Trustee Functions; and
(b) the full terms of a mandate in accordance with which the Trustee shall carry out the Trustee Functions.
4.3 Origin and/or any individuals nominated pursuant to paragraph 4.2 shall satisfy the CMA that, save as required or permitted by the CMA:
(a) such nominated individuals have the necessary qualifications to carry out their mandates, and are employees or partners of an investment bank, retail bank, commercial property agent, building society or law firm or accountancy firm with an established reputation either nationwide or in a substantial part of the UK or in another EU member state;
(b) such nominated individuals are each independent of Origin and of the Group of Interconnected Bodies Corporate to which Origin belongs and of any Associated Person or Affiliate of Origin or of such Group of Interconnected Bodies Corporate and of any Proposed Purchaser of the Divestment Business to be sold pursuant to these undertakings, and, in the reasonable opinion of Origin, are appropriate to be appointed as Trustee; and
(c) such nominated individuals neither are, nor are likely to become, exposed, either directly or indirectly, to a conflict of interest that impairs or may be likely to impair their objectivity or independence in discharging the Trustee Functions.
(a) Origin fails to propose any person or persons in accordance with paragraph 4.2 above; or
(b) none of the persons proposed by Origin pursuant to paragraph 4.2 is approved by the CMA; or
(c) Origin is unable for any reason to appoint within the time limit stipulated in paragraph 4.4 above any such person following approval by the CMA,
Origin shall use its best endeavours to appoint from persons nominated by the CMA one person to carry out the Trustee Functions on the terms of a mandate approved by the CMA. Origin shall use its best endeavours to make such appointment within 5 Working Days of receiving the nominations from the CMA.
4.6 The appointment of the Trustee pursuant to paragraph 4.4 or paragraph 4.5 above shall be irrevocable unless:
(a) a conflict of interest that impairs or may be likely to impair the objectivity or independence of the Trustee in discharging the Trustee Functions arises;
(b) the Trustee ceases to perform the Trustee Functions; or
(c) the CMA is otherwise satisfied that there is good cause for the appointment to be terminated in advance of the satisfactory fulfilment of the Trustee Functions.
4.7 In the event that the appointment of the Trustee is terminated in accordance with paragraph 4.6 above, Origin shall, if requested to do so in writing by the CMA, use its best endeavours to appoint from persons nominated by the CMA one person to carry out the Trustee Functions in accordance with such mandate as is approved by the CMA. Origin shall use its best endeavours to make such appointment within seven Working Days of receiving the nominations from the CMA. Where required by the CMA, the outgoing
Trustee shall continue as Trustee until a new Trustee is in place and a full handover of all relevant information has taken place.
5 THE MANDATE
5.1 The terms of the mandate proposed by Origin pursuant to paragraph 4.2 above shall, as a minimum, contain all provisions necessary to enable the Trustee to carry out the Trustee Functions including, without limitation to the generality of this paragraph:
(a) an exclusive, irrevocable mandate to sell the Divestment Business as required by paragraph 6.1 below to a purchaser as directed or approved in writing in advance by the CMA at no minimum price and on such reasonable terms and conditions as the Trustee considers appropriate to effect an expedient sale;
(b) a mandate to take any other steps necessary for, or incidental to, the Trustee’s mandate under sub-paragraph (a) above;
(c) a comprehensive power of attorney to the Trustee (including the authority to grant sub-powers of attorney to the Trustee’s officers, employees and agents) to enable it to take all steps necessary or appropriate to effect the sale of the Divestment Business;
(d) a mandate to comply with any orders and/or directions given by the CMA; and
(e) a mandate to appoint at Origin’s expense such advisers as the CMA and/or the Trustee reasonably considers necessary or appropriate in connection with the performance of the Trustee Functions.
6 FUNCTIONS OF TRUSTEE
6.2 Without prejudice to the generality of paragraph 6.1 above, the Trustee shall take the following measures in relation to the Divestment Business to the extent to which such measures may be necessary to effect the divestment of the Divestment Business in accordance with the provisions of these undertakings:
(a) the transfer or vesting of property, assets, rights, personnel, liabilities or obligations (including without prejudice any contracts, licences, authorisations, permits or consents);
(b) any other transfer of interests that will take effect with the sale;
(c) the adjustment of contracts, whether by discharge or reduction or assignment of any liability or obligation or otherwise;
(d) the creation, allotment, transfer, surrender or cancellation of any shares, stock or securities; and
(e) the formation or winding up of a company.
6.4 Pending the divestment of the Divestment Business pursuant to paragraph
6.1 above, the Trustee shall monitor Origin’s compliance with its obligations under paragraph 7.1 and paragraph 7.2 below and shall promptly take such measures as it considers necessary to ensure such compliance, as well as reporting in writing to the CMA, if the Trustee concludes on reasonable grounds that Origin is failing or will fail to comply with such obligations.
6.5 The Trustee may give written directions to Origin to take such steps as may be specified or described in the directions for the purpose of securing Origin’s compliance with its obligations under these undertakings or enabling the Trustee to carry out the Trustee Functions. The Trustee may not require Origin to:
(a) offer any reverse premium or similar inducement to a purchaser; or
(b) accept any actual or contingent liability towards a purchaser or otherwise in connection with the divestment of the Divestment Business which would be unusual in scope, duration or financially, having regard to the price and usual market practice in relation to similar disposals.
the purposes of carrying out or securing compliance with the undertakings (or any matter incidental thereto) and shall provide to the CMA such information and reports in relation to the carrying out of the Trustee Functions as the CMA may require. The Trustee shall promptly report in writing to the CMA if the Trustee concludes on reasonable grounds that Origin is failing or will fail to comply with any of its obligations under these undertakings.
6.7 For the purpose of fulfilling the Trustee Functions, the Trustee shall not be bound by instructions of Origin nor shall the Trustee Functions be extended or varied in any way by Origin save with the prior express written consent of the CMA.
7 OBLIGATIONS OF ORIGIN FOLLOWING APPOINTMENT OF TRUSTEE
(a) complying with such written directions as the Trustee may from time to time give pursuant to paragraph 6.6 above; and
(b) providing the Trustee with all such assistance and information as it may reasonably require in carrying out the Trustee Functions.
8 REMUNERATION OF TRUSTEE
9 INTERIM ACTION
9.1 Pending the completion of the divestment of the Divestment Business to the satisfaction of the CMA in accordance with the provisions of these undertakings, save as otherwise agreed in advance in writing by the CMA, Origin shall minimise as far as possible any risk of loss of competitive potential of the Divestment Business and in particular ensure, subject to any derogations granted by the CMA, that:
(a) the Divestment Business is carried on separately from the Origin Business and the Divestment Business’s separate sales or brand identity is maintained;
(b) the Divestment Business and the Origin Business are maintained as a going concern and sufficient resources are made available for the development of the Divestment Business and the Origin Business on the basis of their pre-Transaction business plans;
(c) except in the ordinary course of business, no substantive changes are made to the organisational structure of, or the management responsibilities within, the Divestment Business or the Origin Business;
(d) the nature, description, range and quality of goods supplied in the UK by each of the Divestment Business and the Origin Business are maintained and preserved;
(e) except in the ordinary course of business for the separate operation of the Divestment Business and the Origin Business:
(i) all of the assets of the Divestment Business and Origin Business are maintained and preserved, including facilities and goodwill;
(ii) none of the assets of the Divestment Business or the Origin Business are disposed of; and
(iii) no interest in the assets of the Divestment Business or the Origin Business is created or disposed of;
(f) there is no integration of the information technology of the Divestment Business and the Origin Business, and the software and hardware platforms of the Divestment Business shall remain essentially unchanged, except for routine changes and maintenance;
(g) the customer and supplier lists of the Divestment Business and the Origin Business shall be operated and updated separately and any negotiations with any existing or potential customers and suppliers in relation to the Divestment Business will be carried out by the Divestment Business alone and for the avoidance of doubt the Origin Business will not negotiate on behalf of the Divestment Business (and vice versa) or enter into any joint agreements with the Divestment Business (and vice versa);
(h) all existing contracts of the Divestment Business and the Origin Business continue to be serviced by the business to which they were awarded;
(i) no changes are made to Key Staff of the Divestment Business or the Origin Business;
(j) no Key Staff are transferred between the Divestment Business and the Origin Business;
(k) all reasonable steps are taken to encourage all Key Staff to remain with the Divestment Business and the Origin Business; and
(l) no Confidential Information relating to either of the Divestment Business or the Origin Business shall pass, directly or indirectly, from the Divestment Business (or any of its employees, directors, agents or affiliates) to the Origin Business (or any of its employees, directors, agents or affiliates), or vice versa, except where strictly necessary in the ordinary course of business (for example, where required for compliance with external regulatory and/or accounting obligations) or any steps necessary in order for Origin to comply with these undertakings, including the transfer of information necessary for the divestment process, provided that, upon divestment of the Divestment Business, any records or copies (electronic or otherwise) of Confidential Information held by Origin in relation to the Divestment Business (or vice versa) shall be returned to the relevant business and any copies destroyed (except as may be necessary for the purposes of compliance with the obligations above).
9.2 At all times, Origin will actively keep the CMA informed of any material developments relating to the Divestment Business and the Origin Business, which includes, but is not limited to:
(a) details of Key Staff who leave the Divestment Business or the Origin Business;
(b) any interruption of the Divestment Business or the Origin Business (including without limitation its procurement, production, logistics, sales and employee relations arrangements) that has prevented it from operating in the ordinary course of business for more than 24 hours;
(c) all substantial customer volumes lost by the Divestment Business; and
(d) substantial changes in the Divestment Business's or the Origin Business's contractual arrangements or relationships with key suppliers.
10 CONTINUED SEPARATION
(a) shall not, directly or indirectly, hold, acquire, re-acquire or use:
(i) an Interest in the Divestment Business; or
(ii) any Interest in any company carrying on or having Control of the Divestment Business (other than any investments made in the ordinary course of the operation of any of the employee benefit and pension schemes of Origin or of any members of the Group of Interconnected Bodies Corporate to which Origin belongs of not more than three per cent in aggregate of the issued equity share capital in any such company, whose shares are listed or dealt with on any recognised investment exchange, which carries no more than three per cent of the voting rights exercisable at meetings of such company); or
(iii) other than in the normal course of business, any of the assets of the Divestment Business;
(b) shall procure that no employee or director of Origin or any member of the Group of Interconnected Bodies Corporate to which Origin belongs for as long as they are an employee or director of Origin or any member of the Group of Interconnected Bodies Corporate to which Origin belongs holds or is nominated to any directorship or managerial position in the Divestment Business or directorship or managerial position in any company or other undertaking carrying on or having control of the Divestment Business without the CMA’s prior written consent;
(c) shall not participate in the formulation of, or (other than in the ordinary course of business) influence or attempt to influence, the policy of the Divestment Business or any company or other undertaking carrying on or having control of that Divestment Business; and
11 COMPLIANCE
11.1 Origin shall comply promptly with such written directions as the CMA may from time to time give:
(a) to take such steps as may be specified or described in the directions for the purpose of carrying out or securing compliance with these undertakings; or
(b) to do or refrain from doing anything so specified or described which it might be required by these undertakings to do or to refrain from doing.
11.2 Origin shall co-operate fully with the CMA when the CMA is:
(a) monitoring compliance with the provisions of these undertakings; and
(b) investigating potential breaches of the provisions of these undertakings.
11.3 Origin shall procure that any member of the same Group of Interconnected Bodies Corporate as Origin complies with these undertakings as if it had given them and actions and omissions of the members of the same Group of Interconnected Bodies Corporate as Origin shall be attributed to Origin for the purposes of these undertakings.
11.4 Where any Affiliate of Origin is not a member of the same Group of Interconnected Bodies Corporate as Origin, Origin shall use its best endeavours to procure that any such Affiliate shall comply with these undertakings as if it had given them.
12 PROVISION OF INFORMATION
12.1 Origin shall furnish promptly to the CMA such information as the CMA considers necessary in relation to or in connection with the implementation and/or enforcement of and/or the compliance with these undertakings, including for the avoidance of doubt, any Confidential Information.
13 EXTENSION OF TIME LIMITS
13.1 The CMA may, in response to a written request from Origin, or otherwise at its own discretion, grant an extension to any time period referred to in these undertakings.
14 SERVICE
14.1 Origin hereby authorises Bernardine Adkins and Samuel Beighton of Gowling WLG (UK) LLP ("Gowling WLG"), whose address for service is 4 More London Riverside, London, SE1 2AU, to accept service on its behalf of all documents connected with these undertakings (including any document of any kind which falls to be served on or sent to Origin, or any of its Subsidiaries in connection with any proceedings in Courts in the UK, orders, requests, notifications or other communications connected with these undertakings).
14.3 Paragraph 14.2 above has effect irrespective of whether, as between Origin and Gowling WLG or other nominees, Gowling WLG or other nominees has or continues to have any authority to accept and acknowledge service on Origin’s or any of its respective Subsidiaries’ behalf.
14.4 No failure or mistake by Gowling WLG or other nominees (including a failure to notify Origin of the service of any document, order, request, notification or other communication) shall invalidate any action taken in respect of these undertakings including any proceedings or judgment.
14.5 Any communication from Origin to the CMA under these undertakings shall be addressed to Manager, Market and Mergers Remedies Monitoring, Competition and Markets Authority, Victoria House, Southampton Row, London WC1B 4AD or such other person or address as the CMA may direct in writing.
15 EFFECT OF INVALIDILITY
15.1 Should any provision of these undertakings be contrary to law or invalid for any reason, Origin undertake to continue to observe the remaining provisions.
16 GOVERNING LAW
16.1 Origin recognises and acknowledges that these undertakings shall be governed and construed in all respects in accordance with English law.
16.2 In the event that a dispute arises concerning these undertakings, Origin undertakes to submit to the courts of England and Wales.
17 TERMINATION
17.1 Origin recognises and acknowledges that these undertakings shall be in force until such time as they are varied, released or superseded under the Act.
17.2 Origin recognises and acknowledges that the variation, release or supersession of these undertakings shall not affect the validity and enforceability of any rights or obligations that arose prior to such variation, release or supersession.
18 INTERPRETATION
18.1 The Interpretation Act 1978 shall apply to these undertakings as it does to Acts of Parliament.
18.2 References in these undertakings to any English law term for any legal status, interest, concept or thing shall in respect of any jurisdiction other than England and Wales be deemed to include what most nearly approximates in that jurisdiction to the English law term.
18.3 In these undertakings the word "including" shall mean including without limitation or prejudice to the generality of any description, definition, term or phrase preceding that word and the word "include" and its derivatives shall be construed accordingly.
18.4 For the purposes of these undertakings:
“Act” means the Enterprise Act 2002;
“Affiliate” a person is an affiliate of another person if they or their respective enterprises would be regarded as being under common control for the purposes of section 26 of the Act;
“Associated Person” means a person or persons associated with Origin within the meaning of section 127(4) of the Act and includes any Subsidiary of such a person or persons;
“Bunn” means the business of Bunn Fertiliser Limited (with registered company number 08272284) in relation to blending, selling, and distributing fertiliser products in Great Britain;
“business” has the meaning given by section 129(1) and (3) of the Act;
“CMA” means the Competition and Markets Authority or any successor body;
“Confidential Information” means any business secrets, know-how, commercially sensitive information, intellectual property or any other information of a confidential or proprietary nature;
“Control” shall be construed in accordance with section 26 of the Act, and in the case of a body corporate, a person shall be deemed to Control it if he holds, or has an interest in, shares of that body corporate amounting to 10 per cent or more of its issued share capital or carrying an entitlement to vote at meetings of that body corporate of 10 per cent or more of the total number of votes which may be cast at such meetings;
“Decision” means the CMA’s decision under section 33 of the Act dated 14 July 2017 in connection with the Transaction;
“Divestment Business” means the rights, assets, interests and obligations of or associated with the business of Bunn in Montrose, Scotland, as carried on from its site at 1 Cobden Street, Lunanhead, Montrose, Angus, DD10 8EE, including without prejudice to the foregoing, save as required or permitted by the CMA:
(a) the freehold of the site;
(b) where capable of being transferred, all tangible and intangible assets that are required for the current operation of the business, and are necessary to ensure the viability or competitiveness of the business, including the blending and packing plant and all ancillary equipment, and all office fixtures and fittings, but excluding any stocks of fertilisers held by the business;
(c) where capable of being transferred, all licences, permits, consents and authorisations issued by any governmental organisation for the benefit of the business;
(d) where capable of being transferred, all contracts, leases and commitments of or currently associated with the business, but excluding any lease that the Proposed Purchaser may identify;
(e) where capable of being transferred, all customer, credit and other records of the business to the extent that they are available; and
(f) where capable of being transferred, all employees engaged by the business.
“Divestment Business Property” means the relevant property associated with the Divestment Business as at the date of these undertakings;
“enterprise” has the meaning given in section 129(1) of the Act;
“Glasson” means Glasson Grain Limited with registered company number 01409324;
“Group of Interconnected Bodies Corporate” has the meaning given in section 129(2) of the Act; references to a Group of Interconnected Bodies Corporate shall be to the Group of Interconnected Bodies Corporate as constituted from time to time;
“Interest” includes shares, an interest in shares and any other interest carrying an entitlement to vote at shareholders’ meetings but does not include a contract to acquire shares in the future; and for this purpose "an interest in shares" includes an entitlement by a person other than the registered holder, to exercise any right conferred by the holding of these shares or an entitlement to Control the exercise of such right;
“Key Staff” means staff in positions of executive or managerial responsibility and/or whose performance affects the viability of the Divestment Business, as the case may be;
“Occupation Interest” means an interest in the Divestment Business Property by virtue of which Origin enjoys an unconditional right or is under an unconditional obligation to occupy the Divestment Business Property provided always that: (i) the original purchaser (or its successor) is not in occupation of the Divestment Business Property; and/or (ii) before such interest in the Divestment Business Property arose, the most recent use to
which the Divestment Business Property had been put was that of carrying on the supply of fertilisers;
“Origin” means Origin UK Operations Limited with registered company number 02465499;
“Origin Business” means the business of Origin and its Group of Interconnected Bodies Corporate carried on as 14 July 2017, and including (as from the date of closing of the Transaction) Bunn in relation to the distribution and blending of fertilisers in Great Britain for use in agriculture;
“Proposed Purchaser” means Glasson or such other proposed purchaser for the Divestment Business;
“Subsidiary” shall be construed in accordance with section 1159 of the Companies Act 2006 (as amended), unless otherwise stated;
“Transaction” means the anticipated acquisition by Origin of certain assets comprising the business of Bunn, as agreed on 6 March 2017;
“Trustee” means the person appointed pursuant to paragraph 4.4, paragraph 4.5 or paragraph 4.7 to carry out the Trustee Functions;
“Trustee Functions” means the functions set out in paragraph 6;
“UK” means the United Kingdom of Great Britain and Northern Ireland;
“Working Day” means any day of the week other than a Saturday or a Sunday or any day that is a public holiday in England and Wales; and
unless the context requires otherwise, the singular shall include the plural and vice versa.