(Alliance News) - Studio Retail Group PLC on Friday said it will engage with the UK competition watchdog after the regulator warned schools could lose out if the Lancashire-based retail and education firm disposes of its Findel unit to a "close competitor".
In December of last year, Studio had agreed to sell Findel to the Council of the City of Wakefield, through Yorkshire Purchasing Organisation, for GBP50 million.
Back in June, however, the Competitions & Markets Authority had said it found the transaction raises concerns over the supply of resources to educational institutions in the UK.
The CMA added on Friday: "The CMA has provisionally found that YPO's anticipated purchase of close competitor Findel could leave schools worse off."
The CMA noted that YPO and Findel are two of the "leading suppliers" of education equipment and resources to schools and nurseries.
"During its in-depth phase 2 investigation, the Competition & Markets Authority has looked at the impact of the merger on schools and nurseries. It has provisionally found that both companies compete closely, and any merger would reduce competition resulting in increased prices or reductions in service levels, quality and the range of products offered by the merged company," the watchdog said.
The deal will leave London-listed RM PLC and a number of smaller regional-focused firms as the tie-up's only competitors. The CMA noted that RM is "a generalist UK-wide supplier".
"The CMA provisionally found that competition from smaller, specialist and online-only suppliers is more limited. As a result, the merger would leave educational institutions worse off with few alternative close competitors to the merged company," the regulator explained.
Interested parties have until October 30 to comment on the findings and propose possible remedies, which the CMA said may even include blocking the deal altogether.
Studio Retail on Friday said: "The company will be working with YPO to understand the rationale behind the provisional findings and further engage with the CMA as appropriate ahead of its final report."
Studio Retail shares were flat at 240.00 pence each in London on Friday afternoon.
By Eric Cunha; ericcunha@alliancenews.com
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