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UPDATE 2-Asda to sell 47 Netto stores to appease watchdog

Published 09/23/2010, 11:23 AM

* OFT wants 47 Netto stores sold to ease competition fears

* Asda says number at higher end of its expectations

* Asda says confident of finding buyers (Adds background, Netto owner Maersk share reaction)

LONDON, Sept 23 (Reuters) - Asda, the British arm of U.S. retailer Wal-Mart, needs to find a buyer for almost a quarter of the Netto stores it wants to buy from A.P. Moller-Maersk to win over competition regulators.

Britain's consumer affairs watchdog, the Office of Fair Trading (OFT), said on Thursday Asda needed to sell on a larger-than-expected 47 stores to address its concerns about the deal.

Danish conglomerate Maersk agreed in May to sell the British arm of its Netto discount food stores to Asda for 778 million pounds ($1.2 billion).

Analysts said OFT's requirement could reduce the benefits for Asda, although much would depend on which stores are being sold and whether Asda can find buyers.

"As we've seen, there's no shortage of appetite for stores," said RBS analyst Justin Scarborough, referring to expansion plans at almost all of Britain's top grocers. "But it does create uncertainty," he added.

The news weighed on Maersk's shares, which closed down 1.5 percent.

Asda, Britain's second-biggest grocer behind Tesco, said the OFT requirement was at the higher end of its expectations, but it was confident of finding buyers and converting the remaining stores to Asda supermarkets by late summer 2011, as planned.

However, the first pilot conversions will now take place in the first quarter of 2011 rather than before Christmas.

"Although Asda and Netto offer somewhat different propositions for customers, the evidence from our investigation indicated that Asda did provide a significant competitive constraint on Netto in a number of local areas where they overlapped," said Amelia Fletcher, the OFT's senior director of mergers.

"The OFT is confident that, if agreed, this package of remedies will safeguard competition in 47 such areas, to the benefit of local shoppers, while allowing the remaining store purchases to go ahead."

Asda said it expected the transaction to create around 1,000 jobs. It plans to close one of Netto's depots in Daventry, central England, but take on the majority of staff at its own distribution centres nearby.

Asda has lost market share to its major rivals this year. On Tuesday it unveiled a 100 million pounds relaunch of its core own-brand grocery range in a bid to improve quality and innovation. (Reporting by Mark Potter, additional reporting by Anna Ringstrom in Copenhagen; Editing by David Cowell) ($1=.6386 pounds)

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