Germany's cartel office blocks Edeka takeover of rival
We reported in REFIRE a number of months ago about the bid by Germany’s largest grocery group Edeka to take over the 451 outlets belonging to rival Kaiser’s Tengelmann. The outcome would have a significant effect on new retail property deals throughout Germany. Over the last few weeks Germany’s federal antitrust authority has made its unwillingness to sign off on the deal clear, and, in a preliminary judgement, has given the two parties until March 6th to submit further proposals for a workable solution.
The antitrust authority said the proposal, as it stands, would “further solidify market structures which are already highly concentrated, in particular in Berlin, Munich and several large cities in North Rhine-Westphalia. It would leave Edeka and rival Rewe, including their discount chains Netto and Penny, as effectively the only two remaining local providers, and would significantly imped competition in several food product markets.
In a fresh twist to the ongoing saga, Kaufland Group, headquartered in Neckarsulm near Heilbronn in Baden-Wurttemberg and itself a subsidiary of Schwarz Group (as is discount group Lidl), announced that it too was now interested in buying a number of the Kaiser’s Tengelmann stores. Rewe, too, said it was interested in buying Kaiser’s Tengelmann stores.
It now looks clear that the Hamburg-based Edeka will have to trim back its plans for a complete takeover of the loss-making Kaiser’s Tengelmann with its 16,000 employees. A report in business magazine FOCUS said the group had submitted a new proposal, in which it accepts that any bid would have to involve a lesser number of stores, with the remainder going to a competitor. An earlier attempt by Edeka in 2008 to take over the Tengelmann subsidiary Plus followed along similar lines.
Rewe’s CEO Alain Caparros has been making hay while Edeka boss Markus Mosa has been struggling with the cartel office’s deliberations. Caparros has been garnering headlines by claiming that Rewe would ensure all 16,000 jobs at Kaiser’s Tengelmann were safe should his group take them over, although close market observers believe he would run into the same problems as Edeka with the authorities. Rewe has a 15% market share, compared to Edeka’s 25%.
Retail analysts believe the cartel office would prefer that any sale of Kaiser’s Tengelmann not go to one of the big four groups in Germany (Edeka, Rewe, Aldi and Schwarz Gruppe), but instead go to a group like Switzerland’s Migros. However, Migros is thought to be too busy digesting its German acquisition of the Tegut supermarket group in 2013.
Some analysts also believe that Aldi or Lidl are more interested in waiting for the Kaiser’s Tengelmann stores to be freed up or do not renew their lease agreements, and then moving into the sites with their own range. That Kaiser’s Tengelmann is now ‘in play’ seems to be becoming accepted, and with a market share of 0.6% nationwide it lacks the clout to compete with its bigger rivals.
Edeka has also been wooing politicians with its co-operative credentials, in the hope, some analysts believe, that it may have to play its political card and appeal to the economics minister Sigmar Gabriel to overrule the cartel office, if necessary.