Boots and Alliance UniChem said on Thursday they had been advised that Celesio, the German drugs wholesaler, was likely to appeal against their proposed £7bn ($12.3bn) merger to the UK Office of Fair Trading.
The companies said they had been informed by advisers to the German company that “Celesio or one of its subsidiaries (which include Lloyds Pharmacy and AAH Pharmaceuticals) is likely to make an application for review of the OFT’s conditional clearance decision of 6 February 2006 in relation to the anticipated acquisition by Boots of Alliance UniChem“.
The merger of Boots and Alliance UniChem, the pan-European drugs wholesaler, was given the green light last month despite a warning from the competition authorities about high barriers to entry facing potential rivals in the retail pharmacy sector.
The alliance would bring together Boots’ 1,450 stores with its partner’s 939, and capture 19 per cent of the UK market with sales of more than £13bn. Lloyds Pharmacy has 1,500 branches in the UK.
Stefano Pessina, executive deputy chairman of Alliance UniChem, said earlier this month he was hopeful that the proposed merger would be completed by the end of June.
If Celesio does appeal, its case will be heard by the Competition Appeal Tribunal, which has the power to direct the OFT to reconsider its decision not to refer the proposed merger.
The OFT said last month it had decided not to refer the proposed deal to the Competition Commission as long as 100 stores were divested. It considered that the proposed undertakings offered by Boots were “appropriate to remedy, mitigate or prevent the competition concern identified in its decision“ and that it was “minded to accept these undertakings”.
Before reaching a final decision, however, interested parties were invited to make their views known to the OFT by March 29.
Boots is planning to invest £250m modernising hundreds of smaller stores and improving its supply chain as part of efforts to revitalise the health and beauty brand - but will cut more than 2,000 jobs in the process.
The high street chemist, which completed its sale of Boots Healthcare International at the end of January, is reinvesting a significant part of the proceeds from the £1.9bn sale in the overhaul of the business.
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