Supermarket sell-off will clear Somerfield deal

THE CO-OPERATIVE Group has agreed to a supermarket sell-off to clear its acquisition of Somerfield with the Office of Fair Trading.

The OFT said the Co-op had offered to sell stores in 126 areas where the deal limited competition – but it must find buyers for the stores before the acquisition is approved. The disposals represent about 4% of the enlarged group’s estate.

John Fingleton, the OFT’s chief executive, said the sell-off would represent the, “largest divesture package accepted in UK merger control”, if it goes through.

Manchester-based Co-op made a £1.5bn bid for Somerfield in early July, bringing an end months of talks between the two sides and paving the way for the creation of the UK’s fifth largest retailer with a market share of 8% and 3,000 stores.

It was referred to the OFT later in July. The agency said the deal would create a strong national player to challenge the dominance of the ‘big four’ supermarkets – Asda, Sainsbury’s, Morrisons and Tesco.

But after surveying 40,000 consumers it identified 126 markets where the deal would leave shoppers with one Co-op controlled supermarket.

The OFT said it would only agree to the deal once “up-front” buyers are found for the shops to prevent some being left unsold.

A spokesman for the Co-op and Somerfield said: “The Co-operative Group and Somerfield welcome this afternoon’s announcement by the Office of Fair Trading which, subject to us addressing a small number of local competition issues, clears the way for the creation of a stronger fifth player in the grocery market. This is good news for consumers and good for competition.”

He added that the company was aware of a number of interested parties prepared to bid for the shops.

In a statement Mr Fingleton said: “Once finalised, the divestment package will directly safeguard the welfare of many thousands if not millions of UK consumers by restoring grocery store competition in the 126 local areas affected, while allowing an otherwise likely pro-competitive merger to go ahead.

“If the OFT accepts undertakings in this case, it will be the largest divesture package accepted in UK merger control, based on what is probably the largest consumer survey ever conducted in a merger case.”