The £762m acquisition of Wincanton by GXO could result in increased prices for business customers in the UK, warns the Competition and Markets Authority (CMA).
The regulatory body has released its preliminary findings on the deal that saw Wiltshire-based Wincanton taken over by logistics behemoth GXO and subsequently delisted from the London Stock Exchange earlier this year, as reported by City AM.
GXO secured the takeover after outbidding a 480p per share offer made by French multinational CEVA Logistics.
CEVA Logistics, based in Marseilles, withdrew from the bidding war following GXO’s rival offer of 605p per share.
However, a month after the deal was confirmed, the CMA initiated an investigation into the acquisition.
In its report, the CMA stated that the completed purchase could “reduce competition in the supply of mainstream contract logistics services in the UK”.
Contract logistics services encompass distribution, transport, warehousing and other supply chain services.
The CMA found that GXO and Wincanton are close competitors, “particularly for contracts with large retail customers”.
The watchdog noted that while GXO will continue to face competition from other contract logistics providers, “many of these are significantly smaller, or focus on specific industries or types of logistics services (such as transport)”.
It also stated: “Although some businesses have the option to bring services in-house if contract logistics suppliers do not offer good value, the ability to do this varies by customer.”
“The CMA is therefore concerned that the deal could raise costs for businesses that rely on contract logistics suppliers to move goods around the UK and for other supply chain activities.”
GXO now has five working days to submit proposals to address the CMA’s concerns.
The watchdog said that if suitable proposals are not submitted it will progress to an in-depth phase two investigation.
Naomi Burgoyne, senior director of mergers at the CMA, said: “Contract logistics services are critical for the flow of goods around the country, reducing delays, and ensuring that products reach their destinations efficiently and reliably.”
“These services are essential for millions of people who rely on timely deliveries or being able to buy products off the shelf.”
“This market is worth £16bn in the UK, and we’re concerned that this merger could reduce competition, resulting in higher costs being passed down to consumers.”
“We consider that these competition concerns warrant an in-depth phase two investigation, unless GXO offers solutions which address them.”
Wincanton made first lost in over 20 years ahead of GXO deal
The initial finding from the CMA comes after City AM revealed in July that Wincanton slipped into the red for the first time in more than 20 years in the year leading up to it being taken private.
Wincanton made a pre-tax loss of just under £50m in the 12 months ended 31 March, 2024, having made a pre-tax profit of £38m in the 12 months before.
For the first time since its listing on the London Stock Exchange in 2001, the company has reported a pre-tax loss.
Wincanton attributed this downturn to the “costs incurred to sell” the company, “material impairments”, and ” onerous contract provisions” recognised during the period.
Over the year, the company’s revenue experienced a slight decrease, falling to £1.4bn from £1.46bn the previous year.
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