Sainsbury’s pharmacies takeover halted until Celesio sells England and Wales sites

To complete its takeover of Sainsbury’s pharmacies, Celesio has been ordered to sell pharmacies in 12 areas of England and Wales.

Through its subsidiary Lloyds Pharmacy Limited (Lloyds), Celesio AG (Celesio) operates around 1,540 pharmacies across the UK.

The company aims to acquire all of Sainsbury’s 277 pharmacies, which are usually located inside Sainsbury’s supermarkets.

In a final report published today (July 29th), the inquiry group of independent panel members investigating the merger has identified 12 areas in England and Wales where the two companies’ pharmacies are close competitors.

Therefore, it is expected that the merger will lead to a substantial lessening of competition (SLC). The group published its provisional findings in April.

Depending on the approval of the Competition and Markets Authority (CMA), Celesio will now have to sell a Lloyds pharmacy in each of the 12 areas to a new owner to maintain the current level of competition for the customers.

Celesio will not be permitted to close these pharmacies.

Simon Polito, Inquiry Chair, said: “Although the price of prescription medicines is fixed and some features of quality, range and service are specified by regulation, pharmacies still compete on various aspects of their offer which are important to customers.

“Since pharmacies’ total revenue is largely dependent on the number of prescriptions issued, they have an incentive to attract additional customers - who we’ve found are prepared to switch between the 2 companies’ pharmacies, particularly when they are near to each other in a local area.

“In those areas where a Sainsbury’s pharmacy is currently a strong competitor, under common ownership Lloyds might be able to reduce service quality to increase profits without being concerned about losing customers to a rival.

“By selling the Lloyds pharmacy in those areas to a new owner with the relevant expertise and the incentive to attract customers through its service quality, we can ensure that customers do not lose out from this deal.”

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