The UK competition authority appears unhappy about the attempt by GXO Logistics Inc. to buy Wincanton plc.
In a statement issued on 1st November, the ‘Competition and Markets Authority’ asserted that it had found that “GXO Logistics’ (GXO) completed purchase of Wincanton PLC could reduce competition in the supply of mainstream contract logistics services (CLS) in the UK”. In particular, it is concerned that competition will be reduced in the area of retail services. The Competition and Markets Authority commented that “although 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”.
The Competition and Markets Authority GXO has now given GXO “5 working days to submit proposals to address the CMA’s concerns”. If GXO cannot address these concerns, the Competition and Markets Authority has said it will “progress to an in-depth Phase 2 investigation”.
The timing of this development must be inconvenient for GXO. The offer to purchase Wincanton was made in February of this year with the deal progressing rapidly and, apparently until now, successfully. How GXO will respond is unclear. The assumption might be that it will sell some of its own assets or Wincanton’s assets in order to reduce its presence in the retail segment of the market. However, the purpose of buying Wincanton in the first place was to increase GXO’s penetration of the retail sector in Britain. Wincanton is particularly focused on retailing and has been successful in building a presence with medium and large conventional retailers. These services now account for 62% of Wincanton’s sales. GXO also has a retail presence in the UK, a legacy of its buying contract logistics providers such as Nobert Dentressangle and TDG. GXO, like its parent XPO, has always made economies of scale central to its business model. If the retailing logistics businesses of the combined business are in some way reduced then the attractiveness of the purchase may be less.
GXO has, apparently, very little time to respond and it is unclear how it will do so. There is a possibility that the purchase will fail. In which case GXO’s rival bidder for Wincanton, CMA CGM/Ceva, may sense an opportunity.
Source: Ti Insight
Author: Thomas Cullen
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