UniChem referral scuppers Lloyds Chemists bid

Click to follow
The Independent Online

The pounds 650m two-way bid battle for Lloyds Chemists was effectively kicked into touch yesterday after the Department of Trade and Industry referred UniChem's bid to the Monopolies Commission and said the rival offer from Gehe of Germany raised competition concerns. The Department said it would ask the European Commission, currently looking at the German bid, to pass consideration back to the Office of Fair Trading.

The news means UniChem's bid automatically lapses. It sent shares in Lloyds down 24p to 459p, compared with Gehe's cash bid of 500p, while UniChem dipped just 3p to 243p. It leaves UniChem sitting on a paper loss of around pounds 4m on the 9.9 per cent shareholding built up in Lloyds during the course of the bid and cuts the value of the stake held by Allen Lloyd by pounds 2.2m to pounds 42m.

The decision caused anger in the UniChem camp, whose costs excluding the loss on the shares are now thought to have grown to between pounds 18m and pounds 20m. It will be the second time in four years that the industry has been investigated by the Monopolies Commission, following the inquiry in 1991- 92 into bids for Macarthy by Lloyds and UniChem.

In a statement, UniChem chief executive Jeffery Harris said: "We are very surprised and naturally very disappointed about the outcome of today's decision to refer the acquisition to the MMC." UniChem strongly believed that the acquisition would improve the efficiency of the distribution service to the independent pharmacist and that the creation of a larger retailing chain will improve the competitiveness of our service, he said.

John Taylor, Minister for Competition and Consumer Affairs, said UniChem's proposals raised competition concerns in both the wholesale and retail markets in the UK. A takeover of Lloyds would add around 6 percentage points to the wholesaling market shares of both bidders, each of which currently holds around a third of the market. It would leave either with a chemists chain to rival Boots 1,200 pharmacies, but still less than the market leader's 12 per cent market share.

UniChem's frustration stems from the fact that it spent several weeks before the announcement of its original bid in January attempting to soothe any competition concerns with the Office of Fair Trading. It believed that proposals to sell two regional wholesaing operations in the north of England and Scotland had quelled competition concerns.

There is also anger that the DTI has decided at such a late stage in the bid to call the Gehe bid back from Brussels, given the similarity of the issues at stake. The timetable allows a further three weeks while the request is processed, during which Gehe can continue to prosecute its bid but UniChem is blocked. The bid document for Gehe's revised offer announced last month is due out on Wednesday.