The recent acquisition of CTD Tiles by Topps Tiles has come under renewed scrutiny following concerns raised by the UK’s Competition and Markets Authority (CMA). The Austrian private equity firm MS Galleon, Topps Tiles’ largest shareholder, has strongly criticized the retailer’s decision to purchase the struggling competitor, branding it a “costly and poorly thought-out acquisition,” reports The Times.
MS Galleon, which holds a 29.9% stake in Topps Tiles, has expressed doubts about the strategic and financial merits of the £9 million deal, particularly in light of the CMA’s announcement that the transaction may lead to reduced competition in four key locations—Inverness, Aberdeen, Dorking, and Edinburgh. The regulator fears that the acquisition could negatively impact trade customers and home renovators by limiting choice and increasing costs.
Topps Tiles completed the acquisition of CTD Tiles’ brands, 30 stores, and select stock assets in August 2024, following CTD’s administration process. However, the CMA’s investigation, which began shortly after, has now entered a critical phase, with the retailer given until February 24 to present remedies that could alleviate the regulator’s concerns and potentially avoid an in-depth phase 2 inquiry.
Piotr Lipko, managing director of MS Galleon, reiterated the firm’s opposition to the acquisition, stating, “We have, on multiple occasions, raised concerns about the strategic rationale for the acquisition of CTD and the unreasonably high valuation. Today’s CMA decision only serves to reinforce these longstanding concerns.”
Lipko further urged the Topps Tiles board to focus on modernizing its business model, particularly by enhancing its digital presence and strengthening its omni-channel strategy. He also emphasized the importance of executing a well-planned CEO succession, following the recent announcement that current chief executive Rob Parker will step down later this year.
Despite the ongoing scrutiny, Topps Tiles has reassured stakeholders that it remains engaged in constructive discussions with the CMA. In a statement to investors, the company emphasized its commitment to addressing the regulator’s concerns and navigating the regulatory process professionally.
This latest development comes at a challenging time for Topps Tiles, which has seen its share price decline by approximately 20% over the past year. MS Galleon, which first invested in the company in 2020, has been vocal in its criticism of the leadership’s strategic decisions, previously describing the CTD acquisition as “value-dilutive” and “highly detrimental” to the business and its investors.
As the February 24 deadline approaches, industry suppliers will be closely monitoring how Topps Tiles responds to the CMA’s findings. The outcome of this regulatory process could have significant implications for market competition and procurement strategies within the tiling and home improvement sector.
