Deadline Extension

Check Out Delays Supermarket Deal

Supermarkets_DDP
Tengelmann has failed to reap the fruits of its labor.
  • Why it matters

    Why it matters

    If approved, the deal would give Edeka a 27.5 percent share of the market and further concentrate it among the four big players.

  • Facts

    Facts

    • Edeka, Germany’s largest supermarket operator, plans to buy 451 Kaiser’s Tengelmann stores.
    • The Federal Cartel Office is uneasy and is investigating the deal.
    • Its decision is now due on 7 April, just weeks before the parties planned to merge.
  • Audio

    Audio

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A decision on whether Germany’s biggest supermarket operator can buy hundreds of stores from a rival has been delayed by the country’s powerful competition watchdog.

Edeka announced last year that it wanted to take over 451 stores belonging to Kaiser’s Tengelmann, a chain owned by the grocer Tengelmann, one of Germany’s largest family businesses. It plans to buy the stores, located in Bavaria, Berlin and North Rhine Westphalia, by 30 June.

But the Cartel Office raised concerns that the deal would concentrate too many stores under one owner in a market already dominated by just a few major players.

On 3 December, the agency imposed an interim injunction on Edeka and Tengelmann to prevent them from implementing parts of the planned merger before it had finished an investigation.

A final decision was expected on 6 March, but on Friday the parties presented a more detailed explanations of their sale plans to the Cartel Office. It is thought that they made some sort of concessions, industry sources said.

As a result, the agency decided to delay its decision until 7 April to study the new information.

“For reasons of competitiveness, it would be good if the difference in market share were diminished between Rewe and Edeka.”

Alain Caparros, Chief Executive, Rewe

The German supermarket sector is already very concentrated. There are only a few major companies,  such as Aldi, Rewe, Edeka and the Schwarz group which owns Lidl and Kaufland, and together, they already have an 85 percent share of the market.

At the moment, Edeka has a 26.9 percent share in the market, whereas Rewe, Edeka’s main competitor, has 18.8 percent.

Alain Caparros, Rewe’s chief executive, warned that the fusion of Edeka and Tengelmann would limit competitiveness.

“For reasons of competitiveness, it would be good if the difference in market share were diminished between Rewe and Edeka,” he said.

Mr. Caparros had said that there are other investors who may have an interest in Tengelmann.

“I could imagine that Kaiser Tengelmann would be a good fit for the Swiss chain Migros,” he told Reuters.

 

Germanys Biggest Supermarket Chains-01

 

But other smaller supermarket chains may get the chance to buy Tengelmann too, according to industry sources. The Bünting group in Germany’s northern Ostfriesland or Coop from Kiel may be interested in the ailing Tengelmann.

Tengelmann’ chief executive, Karl-Erivan Haub, said in October last year that he sees no alternative for his ailing supermarket chain but to sell it. Tengelmann has been in the red for 15 years. All efforts to bring the company back into shape have failed. Its market share of only 0.6 percent is too small to remain competitive against big chains such as Edeka or Rewe.

 

Video: Edeka’s award-winning comical commercials have made headlines recently.

 

The author is an editor in Handelsblatt’s companies and markets section, specializing in the trade sector. To contact the author: ludowig@handelsblatt.com

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