The Competition and Markets Authority (CMA) has launched an inquiry into the £7bn takeover of Morrisons by Clayton, Dubilier & Rice (CD&R).
The probe will explore whether the deal, which saw Morrisons’ shareholders agree to the takeover by the US consortium in September last year, constitutes a serious lessening of competition within the country, with the focus set to fall on fears over reduced competition in petrol prices.
In October the watchdog passed an initial enforcement notice which compelled Morrisons to stay operationally independent while it considered whether to launch an investigation into the private equity deal.
It prohibited CD&R from integrating its petrol station business MFG, which has 900 forecourts across the UK, with Morrisons’ 300 filling stations.
“The CMA has reasonable grounds for suspecting that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in CD&R and Morrisons supermarkets ceasing to be distinct,” the CMA said at the time.
The investigation follows its rulings over previous major supermarket takeovers.
In April 2019 Sainsbury’s and Asda abandoned their plans for a merger after a report by the competition authorities concluded it would lead to rising prices and reduced quality for shoppers across the UK.
The body gave final approval to the £6.8bn takeover of Asda by the Issa brothers in June last year.
However, their EG Group operation was forced to sell 27 petrol filling stations, to Park Garage Group, after competition concerns raised by the CMA.
Competition experts Merger said they expected the CMA may require the merged company to sell some of its stations but warned a backdrop of rising prices and reduced competition could prolong the investigation.
In December The Times reported how supermarkets such as Asda had eased competition, amid rising prices and rocketing profits.
It claimed had doubled since the Asda deal and trebled compared to 2019.
“I think CD&R will need to divest a few petrol stations from either the Morrisons or MFG portfolio to get the CMA comfortable with the deal,” said Andrew Taylor, a partner at Aldwych Partners. “However, I am sure CD&R are anticipating this, and have no doubt identified the sites that will need to be sold.”
Taylor said reports of reduced competition at the pumps could prolong the inquiry.
“I don’t think this will prevent the CD&R/Morrisons deal from going through, but it might make the review process a bit tougher than it otherwise would have been.”
The CMA said the phase one inquiry launched today was: “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 2002 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.”
Interested parties have until 10 February to respond to the inquiry.