Anticipated acquisition by Mothercare plc of Chelsea Stores Holdings Ltd

No. ME/3010/07

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, third party views, assessment and decision.  

The OFT's decision on reference under section 33(1) given on 11 June 2007. Full text of decision published on 19 June 2007.

Please note that square brackets indicate text or figures which have been deleted or replaced with a range at the request of the parties for reasons of commercial confidentiality.

PARTIES

Mothercare plc (Mothercare) is a specialist retailer of products (including clothing, travel products, furniture and toys) for mothers-to-be, babies and children up to the age of eight. It operates out of 554 stores, of which 226 are located in the UK and 328 are international franchised stores.  

Chelsea Stores Holdings Ltd (CSHL) is a retailer of toys and other children's products primarily for the 0-6 age range with the focus on 'learning through playing'. It has 214 stores in the UK and Ireland, and 87 international franchises, all branded as the Early Learning Centre (ELC). Its UK turnover in the year ended 5 May 2006 was £186.1 million.

TRANSACTION

Mothercare proposes to acquire the entire issued, and to be issued, share capital of CSHL. The parties notified the transaction, by way of a merger notice, on 30 April 2007. The statutory deadline is 13 June 2007.

JURISDICTION

As a result of this transaction Mothercare and CSHL will cease to be distinct. The UK turnover of CSHL exceeds £70 million, so the turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act) is satisfied. The OFT therefore believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation.

THIRD PARTY VIEWS

The majority of third parties were not concerned by this transaction. Only one concern was raised regarding the potential reduction in consumer choice in pre-school and education/learning toys, which has been addressed above.

ASSESSMENT

The parties overlap in the supply of toys. Consistent with the approach taken in previous OFT decisions and views expressed by third parties, the OFT has considered the merger on the basis of the supply of all toys, by category of toy, and on a national and local basis.

With regards to the supply of all toys in the UK, the parties have a small share of supply of [0-10] per cent (increment [0-5] per cent). Furthermore, there are a number of larger retailers who will continue to act as a constraint on the parties' behaviour post-merger so competition concerns do not arise.

If the supply of toys in the UK is subdivided into categories, the parties primarily overlap in the pre-school, ride-on and creative toy categories. However the constraint imposed by strong competitors (such as Argos and Woolworths), combined with the potential for expansion by retailers such as Tesco, are considered by the OFT to pose a sufficient competitive constraint on the parties' behaviour post-merger.

Similarly, at a local level, the OFT considers that the presence of a number of competitors in each of the areas where the merging parties are both present, combined with the potential for new entry and expansion by existing competitors, would appear sufficient to constrain the parties' behaviour post-merger.

Consequently, the OFT does not believe that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.

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