Co-op Group offers store and funeral home sales to address CMA merger concerns

Co-op Group has offered to sell 15 convenience stores and two funeral homes to address UK competition concerns over its acquisition of Southern Co-op, the Competition and Markets Authority said on 29 September. The CMA provisionally believes the sales could protect competition in affected areas of southern England. It has not yet accepted the proposals or cleared the deal.

The proposed sales are intended to address two kinds of local concern: grocery shopping around some stores operated by the two co-operatives, and attended funeral services in areas served by their funeral homes. For people using those services, the issue is whether the combined business would face enough local competition after the acquisition. The CMA says reduced competition could harm shoppers and people arranging funerals.

What the proposed Co-op Group sales cover

The package comprises sales of 15 convenience stores and two funeral homes. The CMA says the businesses offered stores and funeral homes in each area where it identified a problem. It has provisionally found that the proposed sales in those areas could address its concerns, but will examine the package further before deciding whether to accept it. The announcement does not say that any of the proposed sales has taken place.

The CMA announcement does not identify the individual stores or funeral homes proposed for sale. It therefore does not establish which specific communities would be affected by each sale. Nor does it name buyers. Those details matter to the final assessment because the regulator says it will consider potential purchasers as part of its continuing review.

Why the CMA raised concerns about the merger

The latest step follows the CMA’s phase-one decision on 15 September. According to the regulator’s merger case page, it found a realistic prospect that the acquisition could substantially lessen competition. At that point, it said the deal would be referred for a more detailed phase-two investigation unless the businesses offered acceptable undertakings to address the concerns. The case page still lists the merger inquiry as open.

Co-operative News reported on 16 September that the phase-one grocery concerns centred on local markets around nine Co-op Group convenience stores and 10 Southern Co-op stores. It said the funeral-services concerns centred on one site from each group and covered attended at-need and prepaid services. Those figures describe the earlier areas of concern; they are not a list of the sites now proposed for sale.

In that earlier report, a Co-op Group spokesperson said the CMA had identified no national-level competition concern, describing the issues as arising in a small number of locations where the two businesses overlapped. The spokesperson also said there were no changes for colleagues, members or customers at that stage. The CMA’s current proposal likewise focuses on sales intended to address local concerns, rather than announcing a change across the whole business.

How the Southern Co-op transfer reached this point

The acquisition had already been completed when the CMA announced this remedy review. Southern Co-op said on 27 July that it had been transferred into Co-op Group through a wholly owned subsidiary, Siena Co-operative Limited, while continuing to trade as Southern Co-op. It said the transaction remained subject to the CMA’s review and that the two co-operatives would continue to operate separately while that process continued.

Southern Co-op’s July announcement listed 173 food stores, 69 funeral homes and three crematoria in its business at the time. Those company-reported figures show the broader scale of its operations; the CMA’s proposed remedy covers a much smaller number of sites. Co-operative News also reported in September that the two groups were continuing to operate separately during the regulatory process.

The CMA says both businesses accepted that the deal raised the local competition concerns identified in its investigation. They requested a faster process so they could offer undertakings to address them. The regulator’s 29 September announcement is the next step in that process: it says there are reasonable grounds to believe the offered undertakings, or a modified version, might be accepted.

What happens before the CMA decides

The CMA will seek feedback from third parties, examine the proposed sales in more detail and consider potential buyers. It says it will consult on the undertakings before deciding whether to accept them. The announcement gives no deadline for that consultation or a date for the final decision, so the timing of an outcome remains uncertain.

If the CMA concludes that the undertakings address its concerns, they will become legally binding and it will conditionally clear the merger without referring it to a phase-two investigation. Until then, the proposed sales and possible clearance remain conditional. The regulator has not published a final acceptance of the package, and its merger case remains open.