Master Blenders Bid to Rival Nestle Gets Lengthy EU Probe

D.E. Master Blenders 1753 BV faces an in-depth probe by European Union regulators over a $5 billion bid to create the world’s second-biggest coffee company, rivaling Nestle SA.

Combining Mondelez International Inc.’s coffee unit with Master Blenders, owned by JAB Holding Co., the investment arm of the billionaire Reimann family, risks increasing prices by putting “key local brands in the hands of one company,” the European Commission said in an e-mailed statement. The EU set a May 6 deadline to rule on the deal.

The move is the latest step from JAB to consolidate in coffee. The company last year bought Master Blenders, the Amsterdam-based maker of Douwe Egberts, for about 7.5 billion euros ($9.3 billion), the industry’s biggest deal ever. Mondelez will gain a 49 percent stake in the new company, which will be named Jacobs Douwe Egberts and based in the Netherlands

Mondelez “will continue to cooperate with the commission, works councils and other interested parties as we seek regulatory approval,” the company said in an e-mailed statement. It said it remains confident of closing the deal “in the course of 2015.”

The merged entity will have sales in excess of $7 billion and be the market leader in countries such as France and Austria. The transaction excludes Mondelez’s coffee business in France and brings together brands such as Jacobs, Senseo, Tassimo, Carte Noir and Douwe Egberts.

Single-Serve Systems

Regulators cited concerns that the deal would reduce competition and increase prices for “single-serve” coffee systems using machines that make coffee at the press of the button. Nestle’s Nespresso and Dolce Gusto faces rivalry mainly from Master Blenders’ Senseo and Mondelez’ Tassimo, the EU said. Master Blenders and Mondelez also compete against Nestle by selling capsules for Nespresso machines.

The EU also flagged competition issues related to roast and ground coffee in France, Denmark and Latvia and for filter pads in France and Austria.

While the companies offered concessions to allay EU antitrust concerns, these were insufficient to remove potential problems, regulators said. The EU may block deals, but more often seeks remedies from companies to remove overlaps that trigger antitrust issues.