The takeover of Morrisons by private equity firm CD&R could lead to higher petrol prices in more than 100 places because of overlap between the two groups’ petrol stations, the competition watchdog said today.
The Competition and Markets Authority (CMA) launched a Phase 1 investigation into the £7bn deal back in January. Whilst the takeover has already been completed, the regulator had ordered all parties to remain separate and hold off integration plans until its probe had taken place.
Concerns centred around CD&R also owning the Motor Fuel Group (MFG), the largest independent operator of petrol stations in the UK with 921 sites under brands such as Esso, BP, Shell, Texaco, Jet and Murco. Meanwhile, Morrisons operates 339 petrol stations, the vast majority of which are located at its supermarkets across the country.
The CMA announced today that it found the deal raises competition concerns in relation to the supply of petrol and diesel in 121 local areas across England, Scotland and Wales. These are all areas in which MFG and Morrisons both have petrol forecourts and would face only limited competition after the merger, meaning that the deal could lead to an increase in prices.
“Prices for petrol and diesel have recently hit record highs, which makes it even more important that we don’t allow a lack of competition at the pump to make the situation worse,” said Colin Raftery, Senior Director of Mergers at the CMA.
“We’re concerned that this deal could lead to higher prices for motorists in some parts of the country. But if CD&R and Morrisons are able to address these concerns, then we won’t need to move on to an in-depth investigation of the merger.”
CD&R has been five working days to offer proposals to the regulator to address the competition concerns. The CMA will then have a further five working days to consider whether to accept these or refer the case to a Phase 2 investigation.
A spokesperson for CD&R said: “We note the CMA’s statement and will be responding accordingly. CD&R looks forward to continuing to work constructively with the CMA.”
Similar concerns were raised when the Issa brothers bought Asda due to their ownership of the EG forecourt empire. The CMA eventually forced them to sell 27 petrol stations to get the Asda deal across the line.
NAM Implications:
- NAM-Speak for: …”if CD&R and Morrisons are able to address these concerns”
- Equals “Get rid of compromised sites…”
- So pragmatic NAMs are already budgeting for a reduction in forecourt numbers from the current 1,260 sites…
- …of 121 sites in local areas across England, Scotland and Wales.
- Watch this space…
