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Sainsbury's and Asda reveal 10bn merger talks

Sainsbury's Asda merger

In a move that shocked the retail industry, Sainsbury's and Asda have revealed they are in advanced talks over a £10bn merger. 

Sainsbury's was forced to publish a statement following speculation that appeared in both Sky News and Bloomberg on Saturday. The statement read: “Sainsbury's confirms that it and Walmart are in advanced discussions regarding a combination of the Sainsbury's and Asda businesses. A further announcement will be made on Monday 30th April".

The merger of the second and third largest players in the grocery sector would result in a massive shake-up of the industry, creating a combined retail food and non-food powerhouse larger than long time market leader Tesco.

According to Kantar Worldpanel’s most recent market share data, Tesco holds a 27.6% share of the market followed by Sainsbury’s with 15.8% and Asda with 15.6%.

The Sainsbury’s statement detailing the terms of the agreement, will be published on Monday morning at 7am. The shares-based deal is expected to create a combined company worth around £15bn including debt, probably led by current Sainsbury’s CEO Mike Coupe. It is expected that his opposite number at Asda, Roger Burnley, will report directly to Coupe.

The proposed new business will have 2,800 stores and annual sales of more than £50bn. It's expected that their plan will be to retain both retail brands because they target different customer groups.

An industry source confirmed that Walmart had been trying to sell the struggling Asda chain for some years and the deal brokered with Sainsbury was evidence the US retailer was “flying the white flag” after failing to conquer the UK market during the near two decades it has owned the Leeds-based grocer.

Apparently talks between the two companies have been progressing for more than 12 months, with the deal based on pooling buying power to offer lower prices at the checkout – rather than closing stores or cutting jobs.

The Qatar Investment Authority, the sovereign wealth fund that is currently Sainsbury’s biggest shareholder, is said to be supportive of the plan.

Source: Insight Team

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29 April 2018

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