nsucurrent.com May 24, 2018

Sainsbury's to buy Asda from Walmart for $10.1 billion

01 May 2018, 08:54 | Ruby West

The supermarkets employ about 342,000 people in more than 1,000 stores across the countryCHRIS J RATCLIFFE GETTY IMAGES

The supermarkets employ about 342,000 people in more than 1,000 stores across the country

Britain's Competition and Markets Authority said it will "likely" assess whether the deal could reduce competition and choice for shoppers.

That's the lesson for Mike Coupe after the chief executive officer of British grocer J Sainsbury was caught singing "We're in the Money", on camera as he prepared for a television interview.

The grocer says the deal will "create a dynamic new player in United Kingdom retail" and Sainsbury's has promised to deliver savings to customers, slashing prices on some goods by as much as 10%.

Meanwhile, Mamequa Boafo, senior analyst, retail, at GlobalData notes there is no doubt the proposed merger will lead to the consolidation of the supplier base of both parties, which will assist in leveraging margins across both businesses.

Sainsbury's and Asda supermarkets plan to merge in a deal that could create the UK's biggest retailer with more than a third of the grocery market.

After almost two decades under Walmart's ownership, a purchase that originally sold for $11.4 billion and included net debt in 1999, United Kingdom -based Asda is being sold to British competitor Sainsbury's for £7.3 billion, or $10.1 billion Dollars.

Simran Jagdev, analyst at the Economist Intelligence Unit, added: "The deal points to the highly competitive United Kingdom grocery market, which has always been concentrated in the hands of the top four players - Tesco, Sainsbury's, Asda, Morrisons - but is now facing an onslaught from new challengers".

Sainsbury's is valued at around £5.9 billion.

If it goes ahead, the combination will create a high street titan with a bigger share of the market than Tesco.

Coupe described the deal as being "designed for a new era" of retailing, bringing scale in clothing and general merchandise.

"It will create a business that is more dynamic, more adaptable, more resilient and an even bigger contributor to the United Kingdom economy".

That's not the case for Sainsbury's and Asda, though the fact that they have complementary regional footprints will mitigate in their favour.

Unions have raised fears over the prospects for jobs, although Sainsbury's said that the deal will "offer more opportunities" for over 330,000 colleagues at all levels.

If the deal goes through, the prospect of Sainsbury, Asda, and Argos working together, with Walmart chipping in too, is a pretty powerful combination.

Sir Vince said the CMA should force the companies to sell off stores if the merger meant the new giant was dominant in a particular area, telling the watchdog's new chief, Andrew Tyrie, to "get tough with monopolies".

Sainsbury's reported its full-year results yesterday, showing a first rise in profit in four years. Like for like sales grew 1.3% and the group delivered £185 million in cost savings, driven by cost savings linked to its integration of Argos.

Generating net synergies, post-price investments, across the enlarged group of at least £500 million.

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