German discounter merger in danger as regulator acts

The Federal Cartel Office has warned it may block German retailer Edeka’s plans to merge its Netto discount supermarket chain with Tengelmann’s Plus stores on competition grounds.

The Office said: “Edeka will hold a dominant market position following the merger.” It added that Edeka and Tenglemann can make a statement in favour of the merger by April 17, ahead of the publication of its final decision, expected by April 28.

In November, both companies revealed plans to merge their discount supermarket chains in a joint venture – in which Edeka would hold 70 per cent – giving the group more than 4,100 outlets and combined sales of more than 11 billion (£8.78 billion) in the 2007/08 financial year.

Planet Retail global research director Bryan Roberts said a decision to block the deal would be “surprising”. He added: “The expectation was it would be waved through with a few localised store disposals.

“When you compare the scale of the business that would come out of such a transaction, it would not create a hugely powerful business, but it would be a sizeable discount chain that could rival Aldi and Lidl.”

According to international grocery expert IGD, Tengelmann’s Plus chain delivered estimated food sales of 6.25 billion (£4.94 billion) last year and Edeka’s Netto posted estimated sales of 4.75 billion (£3.75 billion). Both trailed market leader Aldi’s 22.4 billion (£17.7 billion) sales and Lidl’s 12.3 billion (£9.72 billion).

Roberts said that, if the venture were blocked, Tengelmann would likely be the most disappointed, because it has sold, or plans to sell, a number of its Plus operations around Europe.

Over the past year, Tengelmann has sold its Plus stores in countries including Spain and Portugal. Last month, it revealed the sale of its chain in the Czech Republic to Rewe Group.