The UK’s Competition and Markets Authority (CMA) has announced that it will investigate Lloydspharmacy’s proposed acquisition of Sainsbury’s pharmacy business unless the two companies address the CMA’s competition concerns by 18 December 2015.
The move by the CMA follows initial enquiries, begun in September 2015, which have found 78 local areas where the buy-out may reduce market competition and have an impact on consumers.
“After the merger, Lloyds will no longer face competition in certain local areas from one of its rivals and following our initial investigation we are concerned that this might affect choice, quality and service for customers,” says the CMA’s senior director of mergers, Sheldon Mills, who is heading the case. “We think a detailed investigation is needed to look at these concerns.”
A spokesperson for Celesio — of which Lloydspharmacy is a subsidiary — says the company accepts there will be some lessening of competition under the proposed deal. “But we do not believe it is as many as outlined by the CMA.” The company is considering its response to the CMA, “including the option of progressing into [an] investigation”.
The proposed deal was first announced by Celesio AG and Sainsbury’s in July 2015 with the intention that it would be completed by February 2016. Under the deal, Lloydspharmacy — the UK’s second largest retail pharmacy company with more than 1,500 stores — would pay annual rent to Sainsbury’s for each of its 277 instore pharmacies. It also plans to acquire four Sainsbury’s pharmacies located in hospitals as part of the new business plan worth £125m. All pharmacies will be rebranded as Lloydspharmacy under the proposed deal.