Co-op Group has agreed to sell 15 convenience stores and two funeral homes as part of proposed remedies to address competition concerns raised by the Competition and Markets Authority (CMA) over its acquisition of Southern Co-op.
The CMA has provisionally found that the proposed sales could resolve the competition concerns identified during its Phase 1 investigation and will now consult third parties before considering potential buyers for the sites.
If the CMA is satisfied that the undertakings address its concerns, it will conditionally clear the merger without referring it for an in-depth Phase 2 investigation.
The regulator said the proposed remedies cover each of the local areas where it identified competition concerns.
Joel Bamford, executive director for mergers at the CMA, said the regulator had been concerned that the deal could reduce competition for convenience shoppers and people arranging funerals in several local areas in southern England.
“The businesses have engaged constructively to find a solution to these concerns and offered to sell stores and funeral homes in each of the problematic areas,” he said.
“Having reviewed these proposals, we provisionally believe they could resolve our concerns and allow us to clear the deal while protecting competition for the benefit of people in these local communities.”
The CMA said Co-op Group and Southern Co-op had accepted during the investigation that the deal raised competition concerns and had asked to fast-track the investigation so they could offer undertakings to address them.
The proposed remedies will now be subject to consultation and further assessment. The CMA said it would also consider potential purchasers of the stores and funeral homes as part of the process.
CMA concerns over 19 stores
The latest development follows the CMA’s Phase 1 findings announced on 16 September, when it said Co-op Group’s acquisition of Southern Co-op could reduce competition in local convenience grocery markets around 19 stores.
At the time, the CMA identified potential competition concerns around nine Co-op Group stores and 10 Southern Co-op stores, as well as two funeral sites.
It concluded there was a realistic prospect of a substantial lessening of competition in the affected local markets and gave the businesses until 22 September to offer undertakings in lieu of a Phase 2 investigation.
The CMA’s concerns related to competition between the two businesses in the local supply of groceries through convenience stores. It also identified a potential lessening of competition in the provision of attended at-need and pre-paid funeral services around one Co-op Group site and one Southern Co-op site.
The transaction was completed on 26 July, following approval by Southern Co-op members in May.
The acquisition brought Southern Co-op’s 173 food stores, 83 Starbucks coffeehouses, 69 funeral homes, three crematoria, four burial grounds and 77 Welcome franchise stores into Co-op Group, which operates more than 2,300 food stores and around 800 funeral homes.
The two organisations have said the combination will create a larger and more resilient co-operative business while retaining co-operative ownership and supporting members and communities.