Co-op takeover bids face competition probe

EXCLUSIVE

Alliance Boots and Lloydspharmacy could be investigated by the UK's competition regulator if they try to buy the Co-operative Group's pharmacies, a legal expert has said.

The Competition and Markets Authority (CMA) would review a takeover bid by either of the multiples to ensure it did not restrict patient choice, said Lindsay Draffan, an associate at law firm Hempsons.

The regulator had the power to stop the deal going ahead or force the prospective buyer to offload some of the pharmacies to a competitor, said Ms Draffan, an expert in competition law.

The Co-operative Group told C+D last week (June 30) that bids for its 782 pharmacies were at an "advanced stage". Alliance Boots made an offer for the Co-operative Pharmacy in May. Lloydspharmacy's parent company Celesio told C+D on Friday (July 4) that it could not comment on claims in the Sunday Times last month that it had also made an offer.

Under the Enterprise Act 2002, the CMA can examine the takeover of any company with an annual turnover of more than £70 million to decide whether it will restrict consumers' choice, Ms Draffan told C+D. The Co-operative Group's pharmacy business reported sales of £760m last year, according to its latest financial report.

If the CMA identified a problem in an initial two-month analysis of a deal then it could launch an "in-depth" investigation, which could take up to six months, Ms Draffan said. Because Alliance Boots and Lloydspharmacy already had a substantial share of the market it was likely that the CMA would investigate any offer they made, she said.

The investigation would look at the Co-operative Group's pharmacy branches individually to see whether their sale would reduce patient choice in their area, she said.

Although it is voluntary for a buyer to notify the CMA if they think a deal could breach competition law, Lloydspharmacy and Alliance Boots would be highly likely to notify if the legal thresholds were met, Ms Draffan said. The CMA would probably become aware of the deal even if it was not notified and a subsequent investigation would delay the sale further, she said.

The "cash-strapped" Co-operative Group would not want a CMA investigation to hold up the sale and therefore might favour a bid from a private equity firm with no existing market presence, she added.

The Co-operative Group last week reiterated its expectation "that we will sell the business in its entirety during the course of 2014".

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