Sainsbury’s to announce details of talks for £10bn Asda merger
Details of a proposed £10bn mega-merger between Sainsbury’s and Asda will be revealed today, after it emerged that the two giants are locked in takeover talks.
Sainsbury’s will issue a statement to the market this morning after confirming on Saturday that it was in advanced discussions regarding the tie-up with Wal-Mart owned Asda.
City observers have called the deal a “game changer”, which would create the UK’s largest supermarket chain. However, pressure for a full Competition and Markets Authority (CMA) investigation is growing, with politicians and trade union chiefs leading the calls.
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The deal would be the second big acquisition of Sainsbury’s chief executive Mike Coupe’s tenure, following its 2016 takeover of Argos.
Richard Lim, chief executive of Retail Economics said: “The potential tie-up would see the combined business take Tesco head-on. The newly formed retailer would be able to drive improved efficiency through cost-saving synergies, while the integration of Argos across a significantly larger store estate could ‘supercharge’ the non-food business.”
Sainsbury’s is being advised by UBS and Morgan Stanley, while Rothschild is advising Wal-Mart. A deal would create an enlarged group with around 2,800 stores, overtaking market leader Tesco to occupy 31 per cent of the UK’s grocery market.
But Liberal Democrat leader Sir Vince Cable has called for the CMA to investigate the plans, saying the watchdog must “focus on customers”.
He was echoed by shadow business secretary Rebecca Long-Bailey, who said it risked “squeezing what little competition there is in the groceries market even further”.
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But business minister Andrew Griffiths would not be drawn on any potential CMA investigation.
“It’s not unexpected that there will be mergers [in the sector] and companies looking to work together in order to find a way to tackle the very challenging environment they find themselves in,” he commented.
Food retail analyst Bruno Monteyne of Bernstein said that a competition inquiry could result in the closure of Sainsbury’s or Asda branches in areas where the retailers are the only two supermarkets.
Unions Usdaw and GMB have already flagged concerns over job losses as a result of the merger.
“Our priorities will be to protect our members and ensure any deal between the retailers does not impact on their jobs or incomes,” said Usdaw national officer Joanne McGuinness
The talks follow the CMA’s approval of Tesco’s acquisition of wholesaler Booker at the end of last year.
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“Sainsbury’s is searching for ways to bolster its market position following Tesco’s recent takeover of Booker, the UK’s biggest grocery wholesaler, which substantially increased Tesco’s buying power and competitive position,” said Jonathan Buxton, partner at Cavendish Corporate Finance.
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