August 15, 2017 / 11:21 AM / 2 years ago

Sainsbury's puts Nisa takeover on hold over competition concerns

LONDON (Reuters) - Britain’s second largest supermarket group Sainsbury’s (SBRY.L) has suspended bid talks with wholesaler Nisa until it has a clear idea of whether the competition regulator will approve takeovers in the fast-growing convenience sector.

FILE PHOTO - Shopping baskets are displayed at a Sainsbury's store in London, Britain April 30, 2016. REUTERS/Neil Hall/File Photo

Sainsbury’s, which came under fire from shareholders in July over three years of falling profit and the prospect of a fourth in its current year, wants to wait until the Competition and Markets Authority (CMA) publishes provisional findings of its probe of Tesco’s (TSCO.L) proposed 3.7 billion pound takeover of Booker BOK.L.

“Sainsbury’s has decided to pause discussions with Nisa until it better understands how the CMA would review any deal,” a source with knowledge of the situation told Reuters. The CMA’s report into the takeover of Britain’s biggest grocery wholesaler is due to be published at the end of October.

Although Sainsbury’s has put its talks with Nisa on hold for now, the wholesaler’s chairman Peter Hartley told its shopkeeper members on Monday that although exclusive talks had ended, a deal with the supermarket chain was still possible.

“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,” he said.

The CMA said last month it believed that in more than 350 areas where there was an overlap between Tesco shops and Booker-supplied independent grocery retailers, or so-called “symbol” stores, shoppers could get a worse deal.

Tesco’s move on Booker piqued the interest of Britain’s other supermarket giants in the convenience store sector, which is forecast to grow 17.7 percent to 47.1 billion pounds in the five years to 2022, according to industry research group IGD.

British media reports have said Sainsbury’s could pay 130 million pounds ($168 million) for Nisa, whose members operate almost 2,500 stores around the country.

While Sainsbury’s has pursued Nisa, earlier this month Morrisons (MRW.L), the No. 4 supermarket, signed a wholesale supply agreement with convenience chain McColl’s (MCLSM.L) and British media have reported that the Co-operative Group (42TE.L) is also interested in buying Nisa.

Nisa’s Hartley did not confirm Co-op’s interest, but said “another party” that had previously submitted a bid had reaffirmed its interest in making an offer and talks were underway.

“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,” Hartley said, adding that should a suitable offer emerge it would be up to its 1,400 members to decide whether to accept it.

Sainsbury’s and the Co-op both declined to comment.

Editing by Alexander Smith

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