Tesco halted in bid to buy convenience chain

Supermarket giant Tesco faced an 11th-hour hitch in its acquisition of Adminstore today with the news that the Federation of Wholesale Distributors was trying to block the deal.

Tesco announced earlier this year that it was acquiring the family-run chain, which operates the Europa, Harts and Cullens grocery outlets in the London area, for £53.7m (€81.8m).

The move is part of Tesco’s drive to increase its share of the convenience store sector and boost its existing portfolio of Express stores.

But the Federation of Wholesale Distributors (FWD) said today that it had lodged notice of an appeal with the Competition Appeals Tribunal to block the acquisition of the 45 stores.

The Office of Fair Trading cleared the bid on March 5, despite objections from competitors and trade associations.

But the FWD, which represents cash and carry and delivered wholesalers in the UK, is arguing that the OFT’s decision was flawed.

Alan Toft, director general of FWD, said: “The legal terms of reference for the OFT state that it is responsible for protecting consumer interests by ensuring there is fair competition.

“We say it is failing in that respect, Tesco will virtually buy central London with this acquisition.”

He said that by allowing Tesco to buy Adminstore the OFT was exacerbating the problem of the domination of the grocery market by superstore chains, giving them even greater buying power, which was not in the interests of consumers.

He added that by letting Tesco buy the chain, which was previously supplied by some of its members, it was also making it virtually impossible for independent retailers to open new shops in central London.

The FWD said competition rules also state that where the target of a bid has a turnover of more than £70m (€106.6m) the OFT can refer it to the Competition Commission.

It said Adminstore’s turnover for the year to the end of September 2002 was just above this threshold at £72.7m (€110.7m).

The group is asking for a hearing under the Enterprise Act 2000, under which the new Appeals Tribunal was set up.

If it is successful it will be only the second case heard by the Tribunal since the legislation was introduced.

Tesco currently has around 250 of the smaller Express stores, but it eventually wants to expand this to around 1,000. There are currently only a limited number of Express shops in central London.

Although Tesco has a 28% share of the total grocery market, it accounts for just 6% of sales in the convenience store sector.

Iceland owner Big Food Group has also criticised the OFT’s decision to let the deal go ahead, saying it had “serious long-term consequences” for the UK grocery market.