Britain's antitrust watchdog to investigate £1.4-bn J Sainsbury-Home Retail merger

Britain's antitrust watchdog yesterday said that it will launch an inquiry into supermarket chain J Sainsbury Plc's £1.4 billion ($2 billion) proposed acquisition of Home Retail Plc.

The Competition and Markets Authority (CMA) said that it was investigating whether the deal could hurt competition in the UK.

''The CMA is considering whether it is or may be the case that this transaction has resulted in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2001 and, if so, whether the creation of that situation has resulted, or may be expected to result, in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services,'' it said in a statement.

The CMA added that it has invited comments latest by 13 June and it would decide on the merger by 25 July.

In February, J Sainsbury agreed to buy Home Retail for about £1.4 billion, a deal which would give the British grocer control over hundreds of shops selling everything from jewelry to televisions.

Post closing, Home Retail shareholders will own approximately 12 per cent of the combined group, while the remaining 88 per cent with Sainsbury shareholders.

Sainsbury expects to generate synergies of not less than £120 million in the third full year after completion through relocation of certain existing Argos stores into Sainsbury's stores, procurement benefits, and from the sale of Sainsbury's clothing, homewares and seasonal and leisure ranges through the existing Argos network.

Home Retail consists of Argos, one of the most recognised retailing brands in the UK home and general merchandise sector, supported by its Financial Services business.

It offers over 57,000 products through Argos and operates a nationwide distribution network across multiple distribution centres and 845 stores.

The London Stock Exchange-listed company is the holding company of Argos and has a market cap of £1.349 million and generated revenues of £4.23 billion last year.
 
Supermarkets and other retailers in the UK are facing tough competition from shopping websites, that have lower costs and can cut down prices.

Speed of delivery had become a key selling point, with Amazon now promising delivery within one hour in some parts of the UK. The big grocers also have to contend with competition from discount supermarket chains such as Aldi and Lidl.