Boots and Alliance merger faces threat from German rival Celesio

The merger between Boots and Alliance was given the green light on 22 February, with any opposition given one month to lodge an appeal. Although no official appeal has been made, a spokeswoman for Celesio confirmed it would raise concerns over the deal. She said: "The public relies on community pharmacies as a front-line health service. We believe that such a big change requires further consideration."

The move by Celesio is the latest in a series of appeals against OFT decisions. Last week the Association of Convenience Stores won a battle to have the leading supermarkets referred to the Competition Commission. The healthcare technology groups iSoft and Torex had their merger referred to the Competition Appeal Tribunal after a third-party complaint in 2003, and in April last year Alliance UniChem appealed against a merger between Phoenix Healthcare and East Anglian Pharmaceuticals. Sir Christopher Bellamy, the president of the Appeal Tribunal, has been critical of the quality of the OFT's evidence in the past.

Celesio, under the chief executive, Fritz Oesterle, operates 1,527 Lloyds Pharmacy stores. It is the largest chemist in the UK with 12 per cent market share. A merger between Alliance UniChem and Boots will give the combined group control of about 19 per cent of the market.

Boots has agreed to sell 100 stores to comply with the OFT recommendation. The company announced a £70m cash injection into its remaining pharmacies, along with a restructuring plan this week. A spokesman said: "We believe local pharmacies are at the heartland of local healthcare provision. Our decision to spend £70m on revamping our stores proves our commitment."

Most analysts believe the merger will be approved, even if Boots is forced to divest more than the 100 stores demanded by the OFT. Celesio declined to say whether it would bid for the divested stores.

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