GXO’s acquisition of Wincanton has finally been cleared by the Competition and Markets Authority (CMA), subject to the sale of Wincanton’s grocery warehousing business, reports Chris Tindall.

The independent inquiry group leading the CMA investigation into the merger found that GXO’s purchase of Wincanton would reduce competition in grocery warehousing in the UK.

This loss of competition would likely lead to higher costs for grocers, which in turn could be passed on to shoppers and lead to more expensive products at the checkout.

The investigation found that the loss of competition could also hamper innovation and reduce service levels in the market, impacting the efficiency of goods reaching the shelves.

GXO had proposed two solutions; its preferred remedy was a 3PL sponsorship deal, which would fund new logistics providers and maintain contract terms for supermarkets.

Its second solution was to sell off part of Wincanton’s business to a competitor. The CMA said the inquiry group was satisfied that “a modified version” of this latter solution sufficiently addressed competition concerns and cleared the deal.

The CMA said the evidence it received showed that both parties were two of the largest providers of transport services, but that other strong competitors included DHL, Culina and XPO.

DHL and Culina in particular competed closely against GXO and Wincanton and both had competed successfully against them in several large tenders.

As a result, the CMA found that the merger did not raise significant competition concerns in the supply of transport services, nor in the supply of shared warehousing services.

However, the CMA report also said: “Having carefully considered all of the evidence in the round, we found that the effect of this merger is to combine two significant and close competitors in the supply of dedicated warehousing services to grocery customers, and that the remaining constraints…will not be sufficient, either individually or in aggregate, to outweigh the significant reduction in competition arising from the merger.

“We therefore consider that the merger has resulted, or may be expected to result, in a substantial lessening of competition in the supply of dedicated warehousing services to grocery customers.”

Richard Feasey, chair of the independent inquiry group, said: “Warehousing services play a crucial role in ensuring the seamless movement of goods across the UK, allowing our supermarkets to maintain well-stocked shelves with thousands of items we buy every day.

“Healthy competition in this market is key to managing costs for supermarkets and grocers and improving their performance – ultimately ensuring consumers pay the best possible prices for products in stores.

“We are pleased to approve this deal, having worked with GXO and Wincanton to secure the necessary changes to the deal which resolve our concerns.”

Malcolm Wilson, GXO CEO, said: “We are pleased to have the UK regulatory review concluded and are excited to bring the two businesses together.

“The combination of GXO and Wincanton will enhance GXO’s offering for customers across the UK and Ireland and bring presence in strategic verticals that will serve as a springboard for growth.

“We are well positioned to move forward swiftly and look forward to welcoming the Wincanton team to GXO.”

GXO acquired Wincanton on 29 April 2024 in a pure cash transaction.