Booker shares slipped by just over 2% this afternoon after the Office of Fair Trading revealed it was referring the cash & carry giant’s acquisition of loss-making Makro to the Competition Commission.
The OFT said it was referring the £140m deal because of competition concerns at both a national and local level.
Nationally, the OFT said it was concerned the deal would reduce the number of nationwide cash & carry operators from four (Booker, Makro, Bestway and Costco), to three.
And even though Booker had offered to divest some depots to iron out local issues, the OFT also said it had identified competition concerns in 13 local areas.
This is no surprise. Last month, The Grocer analysed the locations of Makro’s 30 depots and their distance from the nearest Booker using Booker’s online store locator. We found 13 were just two miles or less from a Booker. In fact, eight were less than a mile apart.
The analysis followed Booker’s release of its masterplan for the Makro business following clearance from either the OFT or Competition Commission. The plan involved utilising Makro’s much larger depots to introduce delivery areas and, where depots were too close, introducing Booker concessions and closing the Booker site. Sheffield, where Booker and Makro sit just 400 yards apart, had already been identified as the trial location.
With the Competition Commission’s decision not expected until April next year, Booker and Makro must continue to be run separately until then.
This leaves the companies in a frustrating limbo. Wilson had predicted Makro could hit Booker’s operating profits to March 2013 by anywhere between £0 and £10m. We now know this will be £0.
By March 2014, however, Booker had predicted Makro would contribute £10m in extra profits. Fingers crossed that its best laid plans don’t go to waste.
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