Foam Merger Raises Competition Concerns

THE COMPETITION AND MARKETS AUTHORITY (CMA) has found that the loss of competition brought about by the merger of Carpenter and Recticel’s global engineered foams businesses could result in a worse deal for manufacturers.

The deal could ultimately mean that consumers face higher prices and less choice. The firms must now address the concerns identified or face a further, more in-depth, Phase 2 investigation.

Foam Merger

US-based Carpenter Co agreed to buy Belgian firm Recticel’s global engineered foams business in a €656 million deal announced in 2021. The £1 billion turnover Recticel announced its decision to divest its bedding foam business and focus on insulation panels and boards used in residential and industrial construction, in February this year. Both companies own and operate plants in the UK.

The CMA’s initial Phase 1 investigation has found that the merger would remove a close competitor of Carpenter’s, with the firms representing two of just three foam producers with plants in the UK. The CMA is concerned that, if the deal goes ahead, the combined companies will face limited competition in the UK in three foam-related markets.

Sorcha O’Carroll, Senior Director at the CMA, said: “Carpenter and Recticel may not be household names but their products can be found in homes throughout the UK.

“We’re concerned that this merger could reduce competition in the supply of foam and foam products. If the firms fail to address our concerns, the deal will be referred for an in-depth investigation.”

The firms now have five working days to submit proposals to address the CMA’s competition concerns. The CMA then has a further five working days to consider whether to accept any offer instead of referring the case for an in-depth Phase 2 investigation.

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