Co-op Group has offered to sell 15 convenience stores and two funeral homes in an attempt to resolve competition concerns surrounding its completed acquisition of Southern Co-op without entering a full Phase 2 merger investigation.
Co-op Group completed the acquisition in July, but the Competition and Markets Authority subsequently identified local areas where the combination could weaken competition in convenience grocery retail and attended funeral services.
The regulator is now considering a remedy package intended to address those concerns through targeted disposals. It will assess the proposed undertakings, gather third-party views, and consider whether prospective purchasers would be capable of preserving effective competition before reaching a final decision.
The structure of the remedies illustrates the local nature of the CMA’s concerns. Convenience stores compete heavily on proximity, opening hours, product range, and travel time, while funeral services are also purchased within relatively local catchment areas. A transaction can therefore create competition issues in individual towns even when the combined organisation faces extensive rivals nationally.
The companies had already accepted that the Phase 1 process raised concerns and used a fast-track procedure intended to move more quickly towards possible remedies. Joel Bamford, executive director for mergers at the CMA, said the businesses had “engaged constructively to find a solution to these concerns”.
The proposal materially advances the position since the regulator’s Phase 1 findings earlier in September. Co-op then faced the prospect of an in-depth investigation unless it could offer undertakings capable of resolving the identified competition problems.
A conditional clearance would avoid the additional time and uncertainty of Phase 2, but Co-op would have to sell viable trading assets in the locations identified by the regulator. The identity of eventual purchasers matters because merger remedies are intended to preserve competition rather than simply reduce the buyer’s estate.
Southern transferred 170 stores, 70 funeral homes, and three crematoria into a wholly owned Co-op subsidiary in July. The scale of that transfer means the assets proposed for disposal represent only part of the transaction, but regulatory requirements can still influence the wider integration timetable.
Retail combinations commonly seek efficiencies through purchasing, distribution, technology, property, marketing, membership systems, and administrative functions. Hold-separate obligations and unresolved remedies can restrict how quickly those benefits are pursued in affected operations.
Co-op is undertaking that work while continuing its recovery from last year’s cyberattack. Its latest first-half figures showed active membership reaching 7.5 million as the group invested in promotions, stores, and customer propositions following the disruption.
The Southern transaction therefore adds another execution programme alongside technology recovery and wider retail investment. Integration has to produce sufficient commercial benefit to justify the transaction while maintaining store and funeral-service performance and complying with the CMA’s conditions.
The regulator has not yet given final clearance. Its next step is to test whether the proposed asset sales can maintain effective local competition and whether suitable independent buyers can be identified.
If the undertakings are accepted, they will become legally binding and the acquisition can receive conditional clearance without a Phase 2 investigation. If the package proves insufficient, the CMA retains the option of deeper scrutiny. The immediate route to completion now depends less on the strategic case for the Southern acquisition than on whether the proposed disposals satisfy those local competition tests.
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