Tesco has insisted that its plan to acquire as many as 30 Safeway forecourt c-stores does not mean it is reneging on a vow to grow its Express format by only “organic” means.
The multiple’s apparent promise to rule out further c-store acquisitions - made earlier this year in its full-year report as it announced record group profits of more than £2bn (The Grocer, April 16, p4) - had already been greeted with scepticism by independents.
But company secretary Lucy Neville-Rolfe said Tesco had not gone back on its word. “This is not exactly organic,” she admitted, “but we are not buying another company. It is an asset deal that follows from the Safeway-Morrisons merger. It is also quite a small deal in the great scheme of things and we remain committed to organic growth in our c-store business.”
Under the proposed deal, announced on Wednesday, Tesco could take control of as many as 30 forecourt stores that were transferred to Morrisons following the dissolution of the BP and Safeway Partnership in April, taking the total number of Tesco Express outlets up to 580. The value of the deal has yet to be confirmed and will have to get regulatory approval but will be based on Morrisons’ estimated value of the sites of £55.3m. BP has first refusal on 12 of the sites.
However, pressure groups representing independents said the deal was yet further evidence of consolidation, while Tesco admitted it would bump its sales share of the £24bn convenience market up to 6%.
David Rae, chief executive of the ACS, said he had warned officials at the OFT of the threat of “creeping acquisition” by the multiples as he met with them on Tuesday in a last ditch attempt to secure a full market review of the c-store sector. “We only had to wait one day for creeping acquisition to be illustrated,” said Rae, adding that his request to the OFT appeared to have fallen on deaf ears.
“I expect Tesco will be hoping that - as with its acquisitions of T&S and Adminstore, and with Sainsbury’s purchases of Bells and Jacksons - this will pass below competition authorities’ radar because the purchase is of c-stores, not superstores.
“We will be fighting to ensure that this acquisition is referred to the Competition Commission for full consideration.”
John Murphy, director general of the FWD, said retailers were now embroiled in a “war of attrition” for the convenience grocery market, while Victoria Carson from the Forum of Private Business urged the OFT to kill the deal.