GXO’s acquisition of Wincanton is hanging in the balance after the latest investigation into the deal by the UK competition watchdog concluded the merger is ” likely” to reduce competition in the supply of dedicated warehousing services to grocery customers in the UK.
This is the initial finding of the Competition and Markets Authority (CMA) independent inquiry group, published today (19 February).
The independent inquiry group was set up to carry out an in-depth investigation into the merger after the CMA’s initial investigation concluded in November last year that the deal “may be expected to result in a substantial lessening of competition” in the UK market.
Announcing the findings of the independent inquiry today, the CMA said: “Logistics, including warehousing, is essential to the operation of supermarkets and many other businesses in the UK. Efficient logistics systems help to lower costs for both businesses and consumers and ensure that products are available in stores when needed.”
It added: “GXO and Wincanton are currently two of the three suppliers of dedicated warehousing services used by grocers in the UK. The inquiry group considers that some alternatives would remain for supermarket customers following the transaction, in particular they could switch to the third supplier, DHL, and some could switch some of their activities to their own in-house warehouses.
“The inquiry group’s initial assessment, however, is that these remaining alternatives would not be sufficient to prevent fees rising and that the deal could raise costs for grocers that rely on dedicated warehousing services as part of their logistics.”
Richard Feasey, chair of the independent inquiry group, added: ”Contract logistics services play a critical role in ensuring that supermarket shelves are fully stocked for customers in the UK every day of the year.
“Our initial view is that this merger could raise the costs of these services and reduce choice for supermarkets who rely on these services for moving goods across the country.
“We want to ensure competition in this market is working as well as it can to manage costs for supermarkets and grocers, and ensure products continue to reach supermarket shelves efficiently.“
The CMA has invited any interested parties to respond to these provisional findings by no later than 5pm on Wednesday 12 March 2025.
GXO hit back immediately at the group’s findings. A GXO spokesperson said: “We disagree with the CMA’s initial assessment that GXO’s acquisition of Wincanton is likely to reduce competition in the supply of dedicated warehousing services to UK grocers.
“The CMA has found no competition concerns with the vast majority of the Wincanton business. Its focus is limited to a very small group of large and sophisticated companies, which will represent less than 10% of Wincanton revenue.
“This assessment is disproportionate for a business whose total revenue in 2024 exceeded £1.4bn and does not accurately reflect the totality of evidence presented.
“These companies have substantial pricing power, demonstrated ability to do this work themselves and the choice of a wide range of logistics players that are more than capable of servicing their needs.
“GXO and Wincanton are a pro-growth combination that will deliver efficiencies for UK businesses, reduce the overall cost to serve UK consumers and help make the logistics sector more effective and resilient. Further, there is no cost impact to UK customers or consumers from the transaction being approved in full.
“GXO has a long legacy of outstanding performance for customers in the UK and we believe the case for unconditional clearance is strong. We will present our response to the CMA at our upcoming hearing in March and continue to work towards full clearance of the transaction by the end of April.”
This latest ruling will come as a blow to GXO Logistics’ ambitions in the UK. Only last week GXO chief executive officer Malcolm Wilson told analysts, following the publication of the group’s annual results, that GXO “firmly believes” it will get the green light from the Competition and Markets Authority (CMA), indicating it could be as soon as this week.
Wilson said: “We’ve had to recognise that the CMA process has prolonged on longer than we would have originally expected. We still firmly believe that will be a favorable outcome. We expect to hear from them during the course of next week.”
Wilson also revealed GXO’s plans for Wincanton, likening the haulier’s acquisition to its purchase of Clipper Logistics in 2022, which he said played a large part in opening up the UK healtcare sector to GXO, resulting in last week’s announcement of a major $2.5b (£1.99bn) healthcare deal in the UK.
He said: “Wincanton business is trading very, very well, but it’s clear for us that we can achieve with that what we’ve achieved in healthcare.
“Healthcare really came from embryonic business relationships that came out of the Clipper M&A. It was one of the things we saw in Clipper when we were doing that deal - this vertical, plus the business that existed in Germany and that also has proven to be a huge success.
“In Wincanton, the highlights that we see are in new verticals, it’s the industrial sector, defense, aerospace, I think we’ll achieve the same successes, might take us a year, two years following integration.
“That’s normal for top line synergy benefits. You’re seeing that right now. It’s a couple of years since Clipper, but we’re confident we’ll see the same levels of successes coming out of the Wincanton deal.”
