‘No store closures’ as part of Sainsbury’s and Asda merger

Sainsbury’s has confirmed plans to merge with Asda, which is currently owned by US supermarket giant Walmart.

The supermarkets said that grocery prices would fall in both chains as a result of the merger.

Sainsbury’s chief executive Mike Coupe also said the deal would not lead to store closures or job losses in stores.

The combination of the UK’s second and third largest supermarkets would create a giant, representing nearly £1 in every £3 spent on groceries.

The deal will see Asda owner Walmart hold 42% of the new business and receive £2.97 billion in cash, valuing Asda at £7.3 billion. Sainsbury’s is valued at around £5.9 billion.

The new supermarket group will have combined revenues of £51 billion and will aim to generate £500m in cost savings.

Mr Coupe – who will lead the new combined group – said he believed the two supermarkets were “the best possible fit”.

Shares in Sainsbury’s rocketed 20% to 325p at the market open. Shares in Tesco fell 4% and Morrisons stock was down 3%.

The supermarkets say that as a result of the merger they expect to be able to lower prices “by around 10% on many of the products customers buy regularly”.

Sainsbury’s chairman David Tyler said: “We believe that the combination of Sainsbury’s and Asda will create substantial value for our shareholders and will be excellent news for our customers and our colleagues.

“As one of the largest employers in the country, the combined business will become an even greater contributor to the British economy.

“The proposal will bring together two of the most experienced and talented management teams in retail at a time when the industry is undergoing rapid change.”

Asda boss Roger Burnley said: “The combination of Asda and Sainsbury’s into a single retailing group will be great news for Asda customers, allowing us to deliver even lower prices in store and even greater choice.

“Asda will continue to be Asda, but by coming together with Sainsbury’s, supported by Walmart, we can further accelerate our existing strategy and make our offer even more compelling and competitive.”

Following the merger Argos will open outlets within Asda stores, the firms said. Sainsbury’s took over Argos in 2016 and has been integrating the catalogue retailer into its own stores.

Sainsbury’s said it couldn’t comment on what would happen to customers’ nectar points after the merger.

The combined business will overtake current market leader Tesco, representing around 30% of UK grocery sales.

The two companies have asked the Competition and Markets Authority (CMA) to fast-track the deal to a phase two in depth probe, adding that the combination is expected to complete in the second half of next year.

The competition watchdog said it will assess whether the deal could reduce competition and choice for shoppers.

“If a potential reduction in competition is identified, it would be referred for an in-depth, Phase 2 investigation lasting up to 24 weeks – unless the merging parties offered immediate proposals to address any competition concerns identified,” the CMA said.

 

Be the first to comment

Leave a Reply

Your email address will not be published.


*