A major new force is set to be created in the UK convenience retailing sector after a proposed tie-up between Costcutter and the owners of Mace stores was given the green light.
The Office of Fair Trading launched a probe after Bibby Line Group owned Costcutter and Palmer & Harvey the UK’s largest full-range-delivered wholesaler, which operates Mace and two other symbol shops, Your Store and Supershop announced their intention to launch a new company together in March.
The tie-up will create the UK’s second-largest convenience store chain behind Booker’s Premier.
The companies said their new 50:50 joint venture concern, the Buyco, was unique in the convenience store sector and would give the group a combined £5 billion of buying and negotiating power.
The retailer and wholesaler said the new joint venture vehicle would allow them to maximise bulk-buying discounts of goods for their combined 2,400-strong UK store estate.
The tie-up will see Palmer & Harvey (P&H) pass control of its 800-store portfolio to Costcutter in order for it to concentrate on its core wholesaling distribution strengths.
The Courier contacted P&H but a company spokesman was unable to say whether the deal would mean that Mace, which has dozens of outlets across Scotland, and its other brands would eventually disappear as a result of a Costcutter rebrand.
In turn Costcutter, which also operates kwiksave stores in the UK, has signed an eight-year wholesale distribution contract with P&H. The move will see Costcutter’s current distribution agreement with the Nisa chain brought to an end.
Costcutter Supermarkets Group CEO Darcy Willson-Rymer said the rationale behind the tie-up was simple to create “maximum value” by pooling the buying power resource of the individual firms and added that the joint venture would now push forward “at pace”.
The new arrangement was originally expected to come into force in early April, but the intervention by the OFT pushed the tie-up back.
However, the watchdog yesterday gave its approval for the transaction to go ahead. Details of its decision were not immediately available.
“This is great news for Costcutter Supermarkets Group and all our member retailers,” Mr Willson-Rymer said.
“By necessity, the OFT investigation has delayed the Mace, Supershop and Your Store brands moving across to Costcutter Supermarkets Group.
“We will now press ahead at pace so that they are taking advantage of our market- leading retail service and support as soon as possible.”
He added: “This decision also enables us to finalise arrangements regarding our new buy-and-supply system, which will be implemented across Costcutter Supermarkets Group in mid-2014.”