GXO’s £762m acquisition of Wincanton cleared by the CMA

The Competition and Markets Authority (CMA) has cleared the merger between contract logistics services providers GXO and Wincanton – subject to the sale of Wincanton’s dedicated grocery warehousing business to a CMA-approved buyer.

The watchdog had been investigating the £762m deal, first announced in April last year, for the last few months due to concerns that it would likely reduce competition in the supply of dedicated warehousing services to grocery customers and raise costs for British supermarkets.

This would in turn see those costs passed onto shoppers across the UK and lead to more expensive products at the checkout, the CMA had argued in its final report.

The potential loss of competition resulting from the deal could also hamper innovation and reduce service levels in the market, impacting the efficiency of goods reaching supermarket shelves, the watchdog said.

As a result, GXO has agreed to sell Wincanton’s dedicated grocery warehousing business to a CMA-approved buyer.

The inquiry group was “satisfied that this remedy sufficiently addresses its competition concerns and is therefore clearing the deal”, the CMA announced on Thursday.

Richard Feasey, chair of the independent inquiry group, said: “Warehousing services play a crucial role in ensuring the seamless movement of goods across the UK, allowing our supermarkets to maintain well-stocked shelves with thousands of items we buy every day.

“Healthy competition in this market is key to managing costs for supermarkets and grocers and improving their performance – ultimately ensuring consumers pay the best possible prices for products in stores.

“We are pleased to approve this deal, having worked with GXO and Wincanton to secure the necessary changes to the deal which resolve our concerns.”

Read more: Wincanton recommends new £762m offer from GXO

US-headquartered GXO welcomed the decision and announced it was raising its full-year guidance on organic revenue growth (up from 3% to 6%), adjusted EBITDA (up from $840m to $860m) and adjusted diluted EPS (up from $2.40 to $2.60).

Malcolm Wilson, CEO of GXO, said: “We are pleased to have the UK regulatory review concluded and are excited to bring the two businesses together.

“The combination of GXO and Wincanton will enhance GXO’s offering for customers across the UK and Ireland and bring presence in strategic verticals that will serve as a springboard for growth. We are well positioned to move forward swiftly and look forward to welcoming the Wincanton team to GXO.”

Integration is expected to start in the third quarter and the teams are allowed to collaborate on specified ongoing aerospace and defence tenders in the UK effective immediately, GXO said.

No further regulatory reviews are required.

“Across our operations, we are seeing better than expected volumes and accelerated productivity gains in existing operations and new start-ups,” added Wilson.

“Coupled with greater clarity on the timing of synergy benefits from the Wincanton acquisition, we are pleased to raise our full-year guidance, reflecting the resilience and visibility of our model and our diversification across geographies and verticals.”