German retailer Tengelmann has spoken of its disappointment at the conditions placed on its plans to merge its discount store chain with local retailer Edeka.
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The country’s competition watchdog cleared the move today (1 July) but placed a series of conditions on the deal before the two companies can press ahead with their planned venture.
Edeka and Tengelmann had months of discussions with the anti-trust body following their agreement to merge their Netto and Plus outlets amid concerns that the move would reduce competition.
Under that initial deal, Edeka planned to take a 70% stake in a new business that would incorporate the Netto and Plus stores. The venture was set to run around 4,200 outlets in total, generating annual sales of about EUR11bn (US$17.4bn).
However, to get the deal through, Tengelmann will have to sell 378 Plus stores, located mainly in the east of Germany.
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By GlobalDataThe cartel office has also ordered that Tengelmann’s stake in the venture be reduced to 20% and that the companies’ plans to work together on procurement be scrapped.
Karl-Erivan Haub, managing partner at Tengelmann, admitted the number of Plus stores to be sold was “higher than expected”.
Haub also expressed disappointment at the cartel office’s request that Tengelmann’s stake in the venture be reduced.
“Unfortunately the Bundeskartellamt [the cartel office] has not conceded our wish to continue to play an active part in the joint undertaking,” Haub said. “The 80:20 share split required by the authority turns the planned partnership virtually into a sale, which was not our objective. We would have preferred a greater degree of discretion.”
Haub added that the order for the companies to abandon its procurement plans might have a negative impact on Tengelmann’s local supermarket business, Kaiser.
“The fact that we are prohibited from proceeding with the joint purchasing deal between Kaiser’s Tengelmann and Edeka is a bitter pill to swallow,” Haub said. “Even though our supermarket business has been very successful in recent years, by cooperating with Edeka we would have been in a position to safeguard our purchasing more effectively for the long term.”
