ASDA will sell around a quarter of its newly-acquired Netto supermarkets, the Office of Fair Trading said yesterday, in a blow to the grocer’s expansion into smaller city-centre outlets.
Asda paid £778m for Netto in May, but said yesterday it will find buyers for 47 shops after the OFT raised competition concerns. The supermarket is likely to be spared a grilling by the Competition Commission if it co-operates with the OFT, which will police potential buyers to ensure they fit in with each store’s local area.
The Walmart-owned chain said the sale will push back the re-opening of the other 147 branches, which was planned for the Christmas period, to the first quarter of 2011.
OFT senior director of mergers Amelia Fletcher said: “The OFT is confident that, if agreed, this package of remedies will safeguard competition ... to the benefit of local shoppers, while allowing the remaining store purchases to go ahead.”
The Netto purchase will boost Asda’s portfolio of smaller supermarkets to just below 200, in line with Asda’s plan to open 100 new small to mid-sized stores in the next five years.
Speaking before the OFT decision, Asda’s property spokesman Jonathan Refoy told City A.M. the firm is keen to move into city centres including London and Birmingham.
“London for us is a core market, there’s no doubt about it. We have got quite strict growth targets. Moving into central London, it’s a long way from happening right now.
But we will learn a lot from operating the smaller Netto stores.” Analysts said the ruling could reduce the benefits of the deal, depending on which stores are sold and whether Asda can find buyers. “There’s no shortage of appetite for stores,” said RBS analyst Justin Scarborough. “But it does create uncertainty.”