Coop – Switzerland's second-largest supermarket – has been given the go-ahead to buy home electronics chain Fust from the retailer Jelmoli.This content was published on November 26, 2007 - 12:23
But the SFr990 million ($900 million) takeover, which was approved by the Federal Competition Commission (Comco) on Monday, comes with two conditions to help safeguard the household appliance sector.
Comco said the merger risks creating a "dominant collective position" for Coop, which owns electronic retailer Interdiscount, and for rival supermarket giant Migros. Together they dominate the Swiss retail industry with 30 per cent market share.
As a result, the companies that belong to Coop are obliged to forgo exclusivity deals with suppliers – for small domestic appliances as well as well-known electrical goods.
Fust, Switzerland's largest seller of appliances, must also implement an "independent range, price and promotion strategy" for small household appliances such as toasters, coffee machines and mixers.
"We don't see these [conditions] as too serious as we want to continue with Fust as a stand-alone business unit," said Coop's spokesperson Suzanne Erdös.
Despite the deal, which was announced in May 2007, Fust will continue trading under its own name.
Coop says there should be no changes for Fust's employees as the business will maintain its present strategy and function as an independent subsidiary of the supermarket giant.
"All 1,900 [Fust] employees will keep their jobs," said Erdös. "There are no discussions at the moment about closing down any sites."
Erdös added that synergy cost-savings worth SFr10-30 million, which were announced in May by Hansueli Loosli, the head of Coop, were still within reach.
Nearly 60 per cent of Swiss households are regular customers of Fust, which had a net turnover of SFr825 million last year and is expected to earn SFr900 million in 2007.
As part of the overall deal, Coop is also buying Jelmoli's 80 per cent stake in netto24, dubbed the leading online shop in the non-food area in Switzerland.
The takeover is the latest in a long line of consolidations in an already shrinking retail market in Switzerland.
It should allow Coop to strengthen its businesses in the consumer electronics (25 per cent) and domestic appliance (29 per cent) sectors.
Since 2001 Coop has also bought several non-food companies including EPA, Waro and the jeweller Christ.
Coop is also awaiting an imminent decision by Comco on its planned takeover of 12 hypermarkets belonging to French supermarket chain Carrefour worth SFr470 million.
Jelmoli now seems to be concentrating on its property portfolio. It currently owns and manages prime-location sites on the upmarket Rue du Rhone in Geneva and Bahnhofstrasse in Zurich. Commercial rents at the latter can reach SFr7,000 per square metre.
The future of Jelmoli itself is currently under speculation with rumours of German retailer KarstadtQuelle being interested in acquiring its retail and property divisions.
However, the Swiss retailer is remaining tight-lipped about any potential buyout.
swissinfo with agencies
Coop is number two behind Migros on the Swiss retail market.
Both groups sell a mix of brand names and their own products.
The two supermarket giants dominate the Swiss retail industry with 30 per cent market share.
For the food and drinks sector alone - excluding independent distributors - their market share jumps to 70 per cent.
The Swiss retail sector generates SFr75 billion of added value, or 16 per cent of gross domestic product.
In 1995 Globus bought stores from Jelmoli before being swallowed by Migros two years later.
Coop launched a successful takeover of discount chains Waro in 2002 and EPA in 2004.
Denner acquired rival discount chain Pick Pay and will now be taken over by Migros after receiving regulatory approval.
Coop raided the Jelmoli group for electronic retail chain Fust in May and announced in August its intention to take over Carrefour's Swiss interests.