Co-op Group’s purchase of Nisa given the go-ahead

The deal has been cleared by the Competition and Markets Authority and is expected to complete in May

The Competition and Markets Authority (CMA) has cleared the Co-op Group’s purchase of Nisa following an investigation.

The Group became the exclusive bidder for Nisa after Sainsbury’s dropped out, reportedly due to concerns that the CMA could block the acquisition. Nisa members approved the Group’s offer to buy the business for £137.5m last November, but the deal required regulatory approval.

The CMA looked into whether the transaction would result in a situation which might cause “substantial lessening” of competition within the markets.

After examining the evidence, the CMA said it “found that the proposed merger does not give rise to competition concerns”. It concluded that the Group, as a groceries retailer, and Nisa, as a groceries wholesaler, “do not compete head-to-head”.

However, since Nisa supplies over 4,000 groceries stores, the CMA had to also consider the potential impact of the merger on competition between shops.

“During the course of its investigation, the CMA took into account that Nisa-supplied stores would still be free to set their own prices and decide which products to stock after the merger, and so the merged company would not be able to directly determine how they compete,” said CMA’s statement.

It also examined whether the merged company could raise prices or reduce service quality for retail or wholesale customers. It found that existing retail and wholesale competition made this unlikely as there are enough local alternatives to both Co-op and Nisa-supplied stores to ensure that people could still shop around for the best value.

The transaction remains subject to court sanction of the scheme on 4 May. The deal is expected to complete on or around 8 May.

Related… Paul Gosling: Could a deal with Nisa change the Co-op Group’s business model?

“Millions of people throughout the UK shop at convenience stores and supermarkets, and it is vital that they continue to have enough choice to get the best value for them,” said Sheldon Mills, senior director of mergers at the CMA.

“After careful consideration, we’ve found that there is sufficient competition in both the wholesale and retail sectors to ensure that shoppers are not worse off. The merger will therefore not be referred for an in-depth investigation.”

The purchase will cost the Group £137.5m, which will see 1,186 Nisa shareholders receiving a payment of £20,000 per shareholder, alongside a deferred payment of up to £1,654 per share. There are 50,389 shares issued. Additionally, there will be an extra payment of up to 1% of rebateable sales for each shareholder until March 2022. The Group will also take on £105m of Nisa’s existing debt.

“We’re delighted with the CMA decision and are really excited about sharing our plans for the future once we gain court sanction,” said Jo Whitfield, CEO, Co-op Retail.

“Our strategy is to get closer to communities and our new business will create a strong product offer and improved prices for Nisa members that will engage their shoppers across the UK.”

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