The Competition and Markets Authority (CMA) has launched a formal Phase 1 investigation into The Co-operative Group's proposed merger with Southern Co-op, marking the next step in regulatory scrutiny of the deal.
The competition watchdog announced on Thursday (30 July) that it had opened its merger inquiry by issuing a notice to the parties involved.
The investigation follows the completion earlier this week of the transfer of engagements of Southern Co-op into a wholly owned subsidiary of Co-op Group, Siena Co-operative Limited. While the legal transfer has taken place, both organisations have stressed they will continue to operate independently until the CMA completes its review.
The proposed combination would bring together Southern Co-op's network of 173 food stores, 83 Starbucks coffeehouses, 69 funeral homes, three crematoria, four burial grounds and 77 Welcome franchise stores with Co-op Group's estate of more than 2,300 food stores, around 800 funeral homes, a wholesale business supplying approximately 8,000 outlets, as well as its legal services and insurance operations.
The transaction was approved by Southern Co-op members in May and completed on 27 July, subject to regulatory clearance.
Southern Co-op has said the merger is intended to secure the society's long-term future following a prolonged period of financial challenges. The retailer has reported losses for the past three years and previously warned that operating losses are expected to exceed £20 million in the current financial year.
Both organisations have argued that combining their operations would create a larger, more resilient co-operative business while preserving co-operative ownership, member benefits and community investment.
The CMA is expected to announce the outcome of its Phase 1 inquiry by 28 September, when it will decide whether to clear the merger, accept undertakings to address any competition concerns, or refer the transaction for an in-depth Phase 2 investigation.