UK logistics group Wincanton’s £753.5m acquisition by global operator GXO could be subject to an in-depth investigation by the competition watchdog following fears it could lead to higher costs in the sector.
The Competition and Markets Authority (CMA) today said there was risk that the deal, approved by the government in April, could reduce competition in the mainstream UK contract logistics services market, which is worth £16bn.
That in turn could “raise costs for businesses that rely on contract logistics suppliers to move goods around the UK and for other supply chain activities”, it added.
GXO now has five working days to submit proposals to address the CMA’s concerns.
The CMA said if suitable proposals were not submitted, it would “progress to an in-depth Phase 2 investigation”.
Shareholders in Chippenham-headquartered Wincanton overwhelmingly backed GXO’s all-cash 605p-per-share offer after the firm’s directors performed a dramatic U-turn by ditching their previous support for rival 480p-a-share bid from French-owned shipping giant CMA CGM.
In January Wincanton, which has 20,300 employees and 8,500 vehicles in more than 170 sites across the UK, warned it was facing a “challenging trading environment”.
Its best-performing division since the pandemic has been eFulfilment, in which it has invested heavily and won on a number of new contracts.
Its portfolio of clients ranges from retailers such as New Look, IKEA and Sainsbury to defence and industrial customers such as EDF and BAE Systems.
US-owned GXO Logistics is already a major player in the UK market having snapped up Clipper Logistics in 2022 for £1bn.
The CMA said GXO was the world’s largest contract logistics services company while Wincanton was a British supplier of these services.
Both companies supplied mainstream contract logistics services to business customers in both retail – such as groceries, fashion and apparel) and non-retail (such as manufacturing and construction – sectors, it said.
CMA’s investigation found that GXO and Wincanton competed closely, particularly for contracts with large retail customers.
Its report says: “Although GXO will continue to face competition from other contract logistics providers, many of these are significantly smaller, or focus on specific industries or types of logistics services (such as transport).
“Although some businesses have the option to bring services in-house if contract logistics suppliers do not offer good value, the ability to do this varies by customer.
CMA senior director of mergers Naomi Burgoyne added: “Contract logistics services are critical for the flow of goods around the country, reducing delays and ensuring that products reach their destinations efficiently and reliably.
“These services are essential for millions of people who rely on timely deliveries or being able to buy products off the shelf.
“We’re concerned that this merger could reduce competition, resulting in higher costs being passed down to consumers.
“We consider that these competition concerns warrant an in-depth Phase 2 investigation, unless GXO offers solutions which address them.”
