Sainsbury’s bid for Somerfield faces competition probe
Supermarket giant ‘disappointed’ by decision
A potential bid by Sainsbury’s for a package of 171 Somerfield Stores faces an official investigation by the Competition Commission.
Trade and Industry Secretary Patricia Hewitt, acting on advice from the Office of Fair Trading, said there would be substantial overlaps between the two supermarket groups at local level.
Sainsbury’s formally applied for clearance for a possible bid last month, after the collapse of takeover talks between Somerfield and retail entrepeneur John Lovering. Sainsbury’s had been in informal talks with Lovering’s consortium, hoping to acquire a package of stores suitable for conversion to its Sainsbury’s Local convenience format.
Hewitt said: “The OFT has advised me that there is a significant prospect that this proposed acquisition may be expected to result in a substantial lessening of competition. It would lead to a substantial number of overlaps at the local level between Sainsbury and Somerfield stores. Determining the loss of competition will require a detailed assessment by the Competition Commission of each local area in which an overlap occurs.”
Sainsbury’s chief executive Sir Peter Davis said: “We are disappointed with the outcome and will reflect on the issues raised in the report once it has been published.”
Under Takeover Panel rules, Sainsbury’s, like the Lovering consortium, is blocked from making any takeover approach to Somerfield until December, unless a new bidder comes forward.
Mark Hughes, analyst with Numis said the referral was surprising, since market leader Tesco was allowed to buy the number one player in the convenience sector, T&S Stores, without an investigation.
