The Competition and Markets Authority (CMA) has approved Celesio’s £125m takeover of Sainsbury’s pharmacy business, on the condition that the company sells 12 of its existing Lloydspharmacy stores.
An inquiry carried out by the CMA after the deal was announced in July 2015 concluded that there were several areas in England and Wales where the two companies’ pharmacies were in close enough competition that Lloydspharmacy would be disincentivised from trying to attract new customers after the merger.
“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,” says Simon Polito, who chaired the inquiry.
The CMA says 12 existing Lloydspharmacy branches must be sold because, under the terms of the deal, Lloyds is restricted in reducing the quality of services in newly acquired Sainsbury’s pharmacies.
“By selling the Lloydspharmacy in those areas to a new owner with the relevant expertise and the incentive to attract customers through its service quality, we can ensure that customers do not lose out from this deal,” Polito adds.
The CMA has said that one Lloydspharmacy must be sold in the following locations: Beaconsfield, Bracknell, Cardiff, Christchurch, Kempston, Kidlington, Leeds, Liverpool, Luton, Reading/Theale, Sandy and Warlingham. One area – Sutton Coldfield – was named in the CMA’s provisional report in April 2016, but has now been excluded.
Celesio, a German company, currently operates around 1,540 pharmacies in the UK under the Lloydspharmacy banner. It plans to acquire 277 pharmacies located in Sainsbury’s supermarkets and four in hospitals, with around 2,700 members of staff expected to move to Lloydspharmacy stores from Sainsbury’s pharmacies as part of the deal.
Celesio says the merger will come into effect on 1 September 2016.