Tesco cleared to buy T&S
sector looks set to go ahead unchecked following the announcement
that its acquisition of the T&S group will not fall foul of the
competition authorities. A bitter blow for Budgens, which hoped the
deal would be investigated.
Tesco, the leading food retailer in the UK, is well on its way to becoming one of the major convenience store operators there as well following the decision by the UK Office of Fair Trading not to take any further action on its proposed acquisition of the T&S group.
Back in October, Tesco announced its intention to expand the number of Tesco Express convenience store outlets through the £337 million acquisition of T&S, which operates mainly under the One Stop and Day & Nite fascias.
Tesco said it was pleased that the deal would not be referred to the Competition Commission, and that it had now satisfied all the competition requirements set out in its offer document.
"The combination of Tesco and T&S will deliver significant benefits to T&S customers and will bring the Tesco shopping experience to a larger number of neighbourhoods," the company said. "These consumers will benefit from lower prices overall, improved service and store environment and better product availability, quality and choice."
But the news will not be welcomed by Budgens, one of the UK's smaller food retailers, which had called for the acquisition to be referred to the Competition Commission.
Last month the company argued that the acquisition would lead to a reduction in competition and margins, and that Tesco's claims that even taking its number of outlets to around 550, as it proposed, would leave it with just 5 per cent of the UK convenience store market were misleading.
It said that because both convenience stores and, increasingly, supermarkets themselves, were being used for 'top-up' shopping, Tesco's share of that particular market would be far greater than the 5 per cent it suggested.
It also argued that Tesco would be able to exert even greater pressure on suppliers, imposing its own often rigorous conditions on companies selling to T&S - thereby having a major impact on gross margins.
As we reported at the time, Eoin McGettigan executive chairman of Musgrave, the group which owns Budgens, said: "We have asked the OFT to recommend that Tesco's proposed acquisition of T&S stores be reviewed by the Competition Commission, because at present there are too many unknowns about its impact. We are raising questions not complaints.
"The authorities need to be clear about how much market power Tesco will have in the 'top up' shopping market. They need to be clear about the likely effect on suppliers. At the moment we feel there is insufficient analysis of these effects to be confident that the proposed acquisition will not operate against the public interest."
But none of these concerns will now be investigated, with the OFT clearly believing that with just 100 or so convenience stores at the moment, Tesco is no threat to existing operators in that sector, including both Budgens and market leader Co-op, which recently acquired the Alldays chain.
