UK’s Office of Fair Trading considering undertakings offered by Asda with regard to Netto stores acquisition

The UK’s Office of Fair Trading is considering Asda’s propositions regarding its proposed takeover of Netto’s stores in the country. The agency is mulling undertakings offered by Asda regarding its intended takeover of the 194 groceries stores owned by Netto in the UK. Asda is interested in selling 47 Netto stores based all over the UK in a move targeted at solving local competition concerns that have come to light as a result of the merger.

According to the regulatory agency, the planned merger between Netto and Asda stands to create no competition concerns for the UK market. This is because Netto’s market share in the UK sums up to no more than one per cent. But even so, the OFT raised concerns that competition might be considerably cut down in about one in four of the domestic areas where the overlapping stores exist.

From its decision, it is apparent the OFT used previous experiences such as the merger of Co-Op and Somerfield, that established the facts of consumers’ preferences from face-to-face surveys at Asda is a stronger competitor to Netto than Netto is to Asda. The OFT built on its past analysis by allowing for the fact that Asda is a stronger competitor to Netto than Netto is to Asda.

The regulator as well stated reported that the merger would have some efficiency savings that stand to benefit consumers. However, these efficiency savings and benefits are not sufficient to forgo the OFT’s concerns in any local areas. The OFT is however contented that many of the stores that Asda has offered to divest are likely to be of interest to multiple eligible buyers, but that does not stand for all stores, it said.

Before the OFT finally agrees to a divestment package, therefore, Asda will need to find suitable up-front buyers for a number of the stores. Asda is a British supermarket chain which retails food, clothing, toys and general merchandise. It also has a mobile telephone network, Asda Mobile. It has its head office in the Asda House in Leeds, West Yorkshire.

Asda became a subsidiary of the American retail giant Wal-Mart, the world’s largest retailer, in 1999, and is the second largest chain in the UK after Tesco, having overtaken Sainsbury's in 2003. In May 2010, it was announced that Asda would buy all of Netto's UK Operations for a £778 million deal.

24 Sep 2010.