Asda may have to sell off around 10% of the forecourt sites it acquired from the Co-op for £600m in order to meet competition requirements.
Research by location intelligence experts CACI for The Grocer found that 12 to 16 of the 132 Co-op petrol forecourt sites could be in breach of the Competition & Markets Authority’s ‘four to three rule’, whereby a deal that reduced the number of sites in a local area that were owned by different operators from four to three would significantly lessen competition.
CACI ran its analysis based on sites owned by Asda and EG Group, with both businesses owned by the Issa brothers.
“There are complexities with how the CMA would treat this acquisition when applying the rules due to the different brands and fascias at play,” said CACI managing consultant Charlotte King. “For this analysis, CACI have assumed that the Asda and EG forecourts will be treated as one fascia so the number would be slightly lower if they were to be treated separately.”
However, most experts agree that based on recent investigations into the forecourt sector, the CMA would base its judgement on all stores related to the purchaser and not simply the primary retailer conducting the acquisition. It is also widely expected that the CMA will launch a phase 1 investigation shortly.
“Given the Issa brothers’ acquisition of Asda was called in by the CMA, this acquisition will almost certainly also be as it’s adding another significant portfolio of forecourts to the group, despite the purchase being presented as an Asda convenience acquisition strategy,” said Rapleys head of Automotive & Roadside Daniel Cook.
“Effectively it’s taking a medium-size petrol provider out of the market that had previously been in competition with EG and it would signal a green light for other such acquisitions to bypass a competition investigation.”
Last week, forecourt giant EG Group reported a 33% increase in sales for the three months to the end of June, to just under $9bn on a constant currency basis. On the same basis, group EBITDA rose by 0.2%. On a reported basis, group EBITDA decreased by 6.5% to $355m.