£125m deal cleared by competition authorities
COMPETITION authorities have ruled LloydsPharmacy must dispose of stores in 12 areas around the country to be able to complete its takeover of Sainsbury’s pharmacies.
The £125m deal was announced last year by LloydsPharmacy’s parent company Celesio but has been subject to investigation by the Competition and Markets Authority.
Coventry-headquartered LloydsPharmacy operates 1,540 pharmacies across the country and the acquisition would add 277 outlets, which are predominantly in Sainsbury’s supermarkets.
In a summary of its final report published today, the inquiry group of independent panel members investigating the merger has identified 12 areas in England and Wales where the two companies’ pharmacies are such close competitors that the merger may be expected to lead to a substantial lessening of competition.
Celesio will now have to sell a Lloyds pharmacy in each of the 12 areas to a new owner, approved by the CMA, to maintain the current level of competiton for local customers. It will not be permitted to close these phamacies.
The inquiry chairman Simon Polito said: “Although the price of prescription medicines is fixed and some features of quality, range and service are specified by regulation, pharmacies still compete on various aspects of their offer which are important to customers.
“Since pharmacies’ total revenue is largely dependent on the number of prescriptions issued, they have an incentive to attract additional customers – who we’ve found are prepared to switch between the two companies’ pharmacies, particularly when they are near to each other in a local area.
“In those areas where a Sainsbury’s pharmacy is currently a strong competitor, under common ownership Lloyds might be able to reduce service quality to increase profits without being concerned about losing customers to a rival.”
It had been expected that Sutton Coldfield would be an area that required a store to be sold, but the CMA has concluded that competition would not be significantly affected.
The 12 areas it has identified as problematic are Beaconsfield, Bracknell, Cardiff, Christchurch, Kempston, Kidlington, Leeds, Liverpool, Luton, Reading/Theale, Sandy/Potton/Biggleswade area and Warlingham.
