Asda / Sainsburys merger

Subject to regulatory approval, Asda and Sainsburys are to merge their business in the UK. They are the third and second biggest UK supermarket chains respectively.

Sainsburys released a statement confirming the weekend-long rumours of the deal today. Sainsburys has agreed a deal with the Asda parent company Walmart, where Walmart is to take on 42% of the issued share capital of the combined business and receive £2.97bn. The deal would value Asda at £7.3bn. The Sainsburys statement added, “At the time of completion of the Combination, Walmart will not hold more than 29.9% of the total voting rights in the Combined Business.”

Should the Competitions and Markets Authority (CMA) give the go, this would take the new company to being the biggest grocery chain in the UK, with a market share of more than 31%.

Sainsburys bought the Home Retail Group which includes Argos last year. Including the Argos chain there will be 2,800 stores in the retail empire. According to Sainsburys CEO Mike Coup there will be no job losses or store closures of stores (even when many towns have an Asda and a Sainsburys there…). According to Coup the plan is to “maintain both the Sainsbury’s and Asda brands and enable them to sharpen their distinctive customer propositions”.

The Sainsbury’s statement said the merger would “enable investment in areas that will benefit customers the most: price, quality, range and creating more flexible ways to shop in stores and through digital channels, across Sainsbury’s, Asda and Argos”. So, we could perhaps expect to see an expanded roll-out of next-day and same-day home delivery services as well as click & collect offerings.

In a development that may be of particular interest to shoppers, Sainsbury’s said that it expects to “lower prices by c.10% on many of the products customers buy regularly”.

There will be an impact on the retail and supply chain landscape without a doubt. Suppliers will expect to sell to the supergiant grocery chain at lower margins and higher volumes and this will impact everything from farming to the smaller boutique brands that perch on certain stores shelves…