Sainsbury’s delays bid over competition fears

Co-op renews interest in convenience chain Nisa after exclusive talks with Sainsbury’s come to an end

Sainsbury’s is halting a £130million bid for Nisa, the convenience store chain, until the competition watchdog has ruled on Tesco’s £3.7billion takeover of Booker, according to insiders. It is understood the talks were paused over concerns about the Competition and Markets Authority reaction to the Tesco deal.

SAINSBURY’S is shelving making a £130m bid for convenience chain Nisa until the competition watchdog has ruled on Tesco’s £3.7bn takeover of Booker in late October, say insiders.

It is understood the supermarket ended exclusive talks with Nisa last Friday following increasing concerns about how the Competition and Markets Authority (CMA) was assessing rival Tesco’s swoop on Booker.

A source said that “Sainsbury’s has decided to pause discussions with Nisa until it better understands how the CMA would review any deal”.

The CMA is due to rule on Tesco’s takeover of Booker by Oct 26. Industry experts had seen Sainsbury’s swoop for Nisa as a direct reaction to Tesco’s looming assault on the wholesale market.

Since exclusive talks with Sainsbury’s ended, it is understood that the Co-op has returned to the bidding process and has expressed an interest in buying Nisa.

A message to Nisa members from chairman Peter Hartley, seen by The Daily Telegraph, said that “Sainsbury’s have made it clear they remain interested in continuing to work with Nisa and potentially making an offer for the company, but they have informed us that they do not feel sufficiently comfortable to do so until they have greater clarity over the evolving regulatory and competition considerations”.

“The board of Nisa continues to review any serious incoming queries and offers in the best interest of its Members, and against the shifting backdrop of the convenience sector”, he added.

Nisa previously chose to enter exclusive talks with Sainsbury’s as the supermarket had not made its deal conditional on Nisa renewing a contract with convenience chain Mccoll’s, which accounted for around 35pc of Nisa’s sales. Since entering exclusive talks with Sainsbury’s, Nisa has lost the Mccoll’s contract to Morrisons.

The loss of the Mccoll’s contract was seen as a significant blow to Nisa’s dealmaking chances with Sainsbury’s, although both sides raised the argument that the contract had been loss making.

The CMA has surprised the industry so far by analysing Tesco and Booker’s dominance of the UK food and convenience market on a much narrower scope than previously thought. Last month the competition regulator said that the £3.7bn purchase of Booker, which owns the Londis, Budgens, Happy Shopper and Premier convenience shop brands, could damage competition in 350 neighbourhoods.

The CMA then went further by raising concern that the impact of Tesco’s Booker takeover could substantially weaken wholesale rival Palmer & Harvey and threaten its chances of financial survival. Palmer & Harvey relies on Tesco for 40pc of its sales currently, but this could be lost as Booker also competes in the market.

The UK wholesale market has been jolted into a frenzied state of consolidation in reaction to Tesco’s Booker deal. As well as Nisa putting itself up for sale, Palmer & Harvey is scrambling for emergency cash while Spar’s biggest owner, AF Blakemore, is exploring selling off its wholesale arm.

Tesco and Booker have previously tried to argue that the deal would not lessen competition in the market because Booker does not own its convenience shops as they are owned by franchisees. However, the CMA is analysing the two companies’ convenience shops on a narrow geographic basis.

Rival retail chains have also lobbied the competition watchdog to show that Booker and Tesco, which already has a 28pc share of the UK grocery market, do have influence over their convenience stores. It is likely that Tesco would have to offload hundreds of convenience shops to secure clearance.