Sainsbury’s to shed more light on proposed Asda merger
The duo admitted on Saturday that they are in advanced talks over a merger.
Sainsbury’s will shed more light on its £12 billion merger with Asda this week, with the sector bracing for the implications of the shock move.
The duo admitted on Saturday that they are in advanced talks over a merger which would create a new supermarket giant with over £50 billion in sales.
If it goes ahead, the combination will create a high street titan with a bigger share of the market than Tesco.
J Sainsbury plc notes the speculation concerning a possible combination with Asda Group Ltd. Sainsbury's confirms that it & Walmart Inc. are in advanced discussions regarding a combination of the Sainsbury's & Asda businesses. A further announcement will be made 7am Monday.— Sainsbury's News (@SainsburysNews) April 28, 2018
Asda is owned by the world’s largest supermarket retailer, Walmart, and while it is unclear exactly how the deal would be structured, one option is for Sainsbury’s to absorb Asda stores, with Walmart taking a large stake in the combined group.
In a statement issued over the weekend, Sainsbury’s confirmed the talks and said a further announcement will be made on Monday, when the supermarket’s management will also present the plan to City analysts.
Latest figures show that Tesco has a 27.6% market share, while Sainsbury’s has 15.8% and Asda has 15.6%. Together, they would move ahead of Tesco, with 31.4% of the market.
However, the merger would have to be approved by the Competition and Markets Authority (CMA) as the two entities are the second and third largest grocery retailers in the UK.
There is promise, however, that a deal could be approved after the CMA’s decision to allow Tesco to take over wholesaler Booker in a deal worth £3.7 billion.
Sainsbury’s chief executive Mike Coupe has been in acquisitive mood recently, having led a £1.4 billion takeover of Argos in 2016.
But a deal with Asda would represent a massive step up in scale and complexity.
It comes as the so called Big Four – Tesco, Sainsbury’s, Asda and Morrisons – have come under increased pressure from the rise of budget chains Aldi and Lidl, who between them have a 12.6% grocery market share in the UK.
Sainsbury’s is also set to report another dip in full year profits this week.
Analysts at UBS tip the group to post a 6.2% fall in full year pre-tax profits to £472 million.
On an underlying basis, consensus estimates point to a 1.5% fall in profits to £572 million, which would be the fourth consecutive year the metric has fallen.