News / GXO cleared to complete £960m Wincanton purchase

Pure-play contract logistics operator GXO has finally won clearance from UK competition regulators for its £960m ($1bn) acquisition of Wincanton.

The Competition and Markets Authority (CMA) today said the deal could move ahead after GXO agreed to sell Wincanton’s dedicated grocery warehousing operations – warehouses that are operated on behalf of a single client – to a third-party who will be approved by the CMA.

“The inquiry group is satisfied that this remedy sufficiently addresses its competition concerns and is therefore clearing the deal,” the CMA said in a statement.

Under statutory regulations a buyer would need to be found within three months.

In its initial review of the deal, the CMA concluded that it would lead to substantial lessening of competition (SLC) for the UK’s grocery sector, as customer such as Sainsburys, Waitrose and Co-op currently have four warehousing and distribution options – GXO, DHL Supply Chain, Wincanton and in-house operations – and the acquisition would have reduced that to three.

“There are over 100 dedicated warehouses used by grocery customers in the UK and third-party warehousing services provided to grocery customers is estimated to be worth nearly £1bn in 2024.

“Any lessening of competition in the supply of contract logistics services could potentially raise input costs for grocery customers, and in turn risk raising grocery prices for end consumers at a time of already high food price inflation in recent years,” the report said.

Richard Feasey, chair of the independent inquiry group, added: “Healthy competition in this market is key to managing costs for supermarkets and grocers and improving their performance – ultimately ensuring consumers pay the best possible prices for products in stores.

“We are pleased to approve this deal, having worked with GXO and Wincanton to secure the necessary changes to the deal which resolve our concerns,” he said.

However, it found no such concerns regarding grocery customers served in shared warehouses or transportation services offered to supermarkets.

“Shares of supply, bidding data and third-party evidence show that DHL and Culina in particular compete closely against the parties and have competed successfully against them in several large tenders. We found therefore that the merger does not raise significant competition concerns in the supply of transport services.

“The evidence also indicates that there are a wide range of providers for shared warehousing services, including national providers such as DHL, Culina and XPO, as well as many smaller providers. The Parties have lost several tenders and customers to these providers, and third parties have not raised concerns to us regarding shared warehousing,” the CMA’s report explains.

While the sale of the dedicated grocery warehouses remains the final hurdle for the deal to complete, the CMA has agreed to let GXO begin the integration of the other parts of the Wincanton business.

GXO said the integration would begin in the third quarter and added that the CMA had also permitted the two companies “to collaborate on specified ongoing aerospace and defence tenders in the UK effective immediately”.

GXO chief executive Malcolm Wilson welcomed the clearance: “We are pleased to have the UK regulatory review concluded and are excited to bring the two businesses together.

“The combination of GXO and Wincanton will enhance GXO’s offering for customers across the UK and Ireland and bring presence in strategic verticals that will serve as a springboard for growth.”

Meanwhile, strong trading conditions in the early months of this year led GXO to up its full-year financial guidance today, with organic revenue growth of 3.5%-6.5% expected and adjusted EBITDA range increased to $860m-$880m, from the previous $840m-$860m range, and including expected synergies from Wincanton.

“Across our operations, we are seeing better than expected volumes and accelerated productivity gains in existing operations and new start-ups,” Mr Wilson said.

“Coupled with greater clarity on the timing of synergy benefits from the Wincanton acquisition, we are pleased to raise our full-year guidance, reflecting the resilience and visibility of our model and our diversification across geographies and verticals,” he added.