CMA flags competition concerns on Asda takeover by Issa brothers

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General view of the petrol and diesel prices at an Asda filling station on April 21, 2020 in Milton Keynes, United Kingdom. (Photo by Catherine Ivill/Getty Images)

The Asda takeover by Issa brothers and private equity firm TDR Capital could lead to higher petrol prices in some parts of the country, the Competition and Markets Authority (CMA) has said.

Announcing the findings of its phase 1 initial investigation into the £6.8 billion deal, the CMA asked the buyers to address the competition concerns identified within 5 working days in legally binding proposals.

“Our job is to protect consumers by making sure there continues to be strong competition between petrol stations, which leads to lower prices at the pump. These are two key players in the market, and it’s important that we thoroughly analyse the deal to make sure that people don’t end up paying over the odds,” Joel Bamford, Senior Director of Mergers at the CMA, said.

“Right now, we’re concerned the merger could lead to higher prices for motorists in certain parts of the UK. However, if the companies can provide a clear-cut solution to address our concerns, we won’t carry out an in-depth phase 2 investigation.”

The Issa brothers and TDR Capital also own EG Group, which operates 395 petrol stations in the UK, while Asda owns 323.

The CMA inquiry, launched in last December, focused on the places where the petrol stations of both firms overlap and the watchdog has found that the deal raises local competition concerns in 36 areas across the UK and the supply of a specific type of fuel – called auto-LPG – in a further area.

The Issa brothers and TDR Capital said they will work with the regulator to avoid a reference to the next stage of the inquiry.

“We will be working constructively with the CMA over the course of the next 10 days in order to arrive at a satisfactory outcome for all parties within phase 1. This would provide welcome certainty for our colleagues, suppliers and customers, and allow us to move forward with our exciting plans for investment and growth at Asda,” a spokesperson said.

The CMA has a further 5 working days to consider whether to accept any offer instead of referring the case to a phase 2 investigation.

The Issa brothers and TDR Capital have completed the acquisition of Asda from Walmart in February through jointly owned company Bellis. They have also announced that they will sell Asda’s petrol forecourts business to EG Group for £750 million after the completion of the deal.