Watchdog Fear Over Sainsbury's Pharmacy Deal

The owner of Lloyds Pharmacy may have to sell branches in 13 areas after the competition watchdog raised concerns about its £125m deal to buy Sainsbury (Amsterdam: SJ6.AS - news) 's network of in-store chemists.

Germany's Celesio (LSE: 0OPB.L - news) , which operates 1,540 pharmacies across the UK through the Lloyds brand, is planning to buy 277 stores that are mainly within or next to the supermarket's stores.

It (Other OTC: ITGL - news) has prompted an inquiry by the Competition and Markets Authority (CMA).

The CMA said it had identified 13 areas in England and Wales "where the two companies' pharmacies are such close competitors that the merger would be expected to lead to a substantial lessening of competition".

The deal would add to Celesio's share of the £14.5bn pharmacy market – largely accounted for by NHS prescriptions worth £10bn.

Simon Polito, chair of the inquiry, said: "We have provisionally found that after the merger Lloyds will no longer face sufficient competition in 13 areas and expect that in these areas customers will lose out."

The probe had initially identified 32 areas covering 78 stores as "potentially problematic" before narrowing the number of areas down to 13 - with the number of stores not given.

The CMA has invited responses to its findings, to be submitted by 23 May.

It comes as Sainsbury's is separately swallowing up the owner of high street retailer Argos in a £1.4bn deal . The CMA is expected to give its views on this deal in the summer.