Sainsbury's to become UK's largest supermarket following Asda merger
May 01 2018 by Cristina Jennings
The UK Competition and Markets Authority past year approved Tesco's takeover of wholesaler Booker, saying the deal would not reduce competition in the sector, which is known for its razor-thin margins and frequent price wars.
The merger will maintain both Asda and Sainsbury brands and the companies said that Walmart, which is the parent of Asda, will hold 42% of the share capital of the new entity and would not hold over 29.9% of the overall voting rights. Wal-Mart will be a "long-term partner", with nearly 30% of share voting rights and two board seats upon completion.
The duo - the UK's number two and three supermarkets - said on Monday that the unified group would have combined revenues of £51 billion and boast a network of 2,800 Sainsbury's, Asda and Argos stores.
Britain's Competition and Markets Authority (CMA) said they will carry out a review of the merger that will create Britain's biggest retail store group, accounting for a 30-percent share of the market and knocking Tesco off the top perch. Together, the supermarket chains employ 330,000 people.
The deal is expected to be completed in the second half of 2019 but still needs approval from shareholders and the UK Competition and Markets Authority.
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Could we see our local stores closed, or restructured? It hails a "strong" position in both the womenswear and childrenswear markets and says there are opportunities for future growth in menswear, which now accounts for 15% of clothing sales and is the retailer's fastest growing clothing category.
The merger risks "squeezing what little competition there is in the groceries market even further", Long-Bailey told the BBC on Saturday when the news of a possible deal first emerged.
Ian Mean, Business West director for Gloucestershire, said: "My initial feeling about the merger is obviously potentially good news for the shopper with lower prices but there must be concern for producers and staff".
Sainsbury's CEO Mike Coupe would lead the combined group.
"Ultimately there has to be job losses and the suppliers will have to pay through lower prices for the larger volumes they may see". Integrating supermarkets is tricky, too: when WM Morrison bought rival Safeway in 2004, the enlarged group lost more than a quarter of its market share through a combination of store disposals and integration problems, according to Bernstein analysts.
So will Sainsbury's be forced to slash prices at the tills or will Asda get more expensive?
"A merger of this size will concentrate a lot of power in the hands of one giant company", warned Mike Cherry, national chairman of the Federation of Small Businesses.
Some 350 million pounds of the planned synergies would come from buying savings, and 75 million from putting branches of Sainsbury's general merchandise specialist Argos into Asda stores. Sainsbury's bosses have said they could cut costs to customers by up to up to 10% after the merger.