The Office of Fair Trading has launched an investigation which could send shockwaves through the multiples’ boardrooms.
The OFT, which usually only considers major deals such as the proposed takeover of Safeway or Sainsbury’s wish to buy 179 Somerfield stores, is considering whether the purchase by Tesco of a single Co-operative Group store in Slough should be referred to the Competition Commission.
This raises the spectre of the OFT launching investigations whenever a major multiple tries to buy a store, and could cause chaos when the Competition Commission delivers its verdict on the companies planning to
take over Safeway. If, as is expected, Morrisons gets the go ahead, it is likely to have to divest anywhere from 30 to 100 stores, but question marks over multiples’ bids for individual stores could leave the process bogged down for months. The announcement that has sparked off the alarm was made on Monday when the OFT said it was looking into the Slough deal under the merger provisions of the 2002 Enterprise Act, inviting interested bodies to contact it by September 15.
If it decides the deal is covered by the Act, it will further consider whether it “may be expected to result in a substantial lessening of competition within any market or markets in the UK”.
A report in The Grocer on August 16 (p21) forecast the deal would increase Tesco’s share of the market in the Slough area from 40% to 52% and the store would be ranked 83rd in the Tesco estate based on turnover.
An OFT spokesman agreed it was highly unusual for it to consider a deal this small. He denied there had been a change of policy, but would not rule out similar investigations in the future. He said: “It depends on individual cases. If something similar happens in another locality we might look into it.”
The OFT has a target of 40 days for determining such investigations, he added.
Property expert Stephen Clarke, director, financial consulting, DTZ, said: “I don't think this raises the prospect of all Tesco’s acquisitions coming under scrutiny but it does suggest that anyone that wants to acquire a portfolio or a single store will have to clear it with the OFT first.”
John Wood
The OFT, which usually only considers major deals such as the proposed takeover of Safeway or Sainsbury’s wish to buy 179 Somerfield stores, is considering whether the purchase by Tesco of a single Co-operative Group store in Slough should be referred to the Competition Commission.
This raises the spectre of the OFT launching investigations whenever a major multiple tries to buy a store, and could cause chaos when the Competition Commission delivers its verdict on the companies planning to
take over Safeway. If, as is expected, Morrisons gets the go ahead, it is likely to have to divest anywhere from 30 to 100 stores, but question marks over multiples’ bids for individual stores could leave the process bogged down for months. The announcement that has sparked off the alarm was made on Monday when the OFT said it was looking into the Slough deal under the merger provisions of the 2002 Enterprise Act, inviting interested bodies to contact it by September 15.
If it decides the deal is covered by the Act, it will further consider whether it “may be expected to result in a substantial lessening of competition within any market or markets in the UK”.
A report in The Grocer on August 16 (p21) forecast the deal would increase Tesco’s share of the market in the Slough area from 40% to 52% and the store would be ranked 83rd in the Tesco estate based on turnover.
An OFT spokesman agreed it was highly unusual for it to consider a deal this small. He denied there had been a change of policy, but would not rule out similar investigations in the future. He said: “It depends on individual cases. If something similar happens in another locality we might look into it.”
The OFT has a target of 40 days for determining such investigations, he added.
Property expert Stephen Clarke, director, financial consulting, DTZ, said: “I don't think this raises the prospect of all Tesco’s acquisitions coming under scrutiny but it does suggest that anyone that wants to acquire a portfolio or a single store will have to clear it with the OFT first.”
John Wood
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