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Asda-Sainsbury $9 billion UK supermarket deal blocked

Merger between Walmart’s Asda brand and Sainsbury halted by antitrust concerns

Michael Browne, Executive Editor

April 25, 2019

2 Min Read
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British regulators announced today that the proposed sale of Walmart’s Asda supermarket brand to Sainsbury’s would not be allowed to go through due to antitrust concerns.

The deal valued Asda at 7.3 billion pounds ($9.4 billion), and would have created a mega retailer with 2,800 stores and combined annual sales of roughly 51 billion pounds ($66 billion).

"It's our responsibility to protect the millions of people who shop at Sainsbury's and Asda every week," Stuart McIntosh, who headed the investigation by the United Kingdom's Competition and Markets Authority (CMA), said in a statement. "We have concluded that there is no effective way of addressing our concerns, other than to block the merger."

The decision followed a recommendation in February that the deal be blocked or that the merger partners be required to divest a large number of stores or either the Asda or Sainsbury’s brand.

The CMA concerns were that the deal, first announced almost exactly one year ago, could be detrimental to consumers by potentially leading to higher prices, lower-quality goods and an overall poor shopping experience.

In an effort to allay those concerns, Sainsbury’s had offered to roll out 1 billion pounds in price cuts and sell as many as 150 stores, a proposal that was rejected by the CMA.

Related:Walmart’s deal to sell Asda to Sainsbury’s in peril

“The CMA’s conclusion that we would increase prices post-merger ignores the dynamic and highly competitive nature of the U.K. grocery market,” Sainsbury Chief Executive Officer Mike Coupe said in a statement. “The CMA is today effectively taking 1 billion pounds out of customers’ pockets.”

The ruling throws a wrench into plans for Walmart, which has been looking to move out of day-to-day retail operations in the British market. The deal with Sainsbury would have allowed Walmart to keep a foothold in the UK through a minority holding in the combined company.

According to a Bloomberg report, in the aftermath of the blocked deal, Walmart is exploring options including an initial public offering of Asda or revisiting another sale. However, Asda’s recent improved performance — the chain has reported seven consecutive quarters of growth — eases any pressure on Walmart to act quickly.

“While we’re disappointed by the CMA’s final report and conclusions, our focus now is continuing to position Asda as a strong UK retailer,” Judith McKenna, CEO of Walmart International, said in a statement. “Walmart will ensure Asda has the resources it needs to achieve that.”

As of Thursday morning, Walmart shares were trading 0.2% lower on the NYSE.

Related:Walmart to sell Asda subsidiary to Sainsbury’s

According to the companies, the blocked merger would have created a network of more than 2,800 Sainsbury’s, Asda and Argos stores — including supercenters, superstores, supermarkets and convenience stores — plus some of the UK’s most-visited retail websites, for a total of 47 million weekly customer transactions. 

About the Author

Michael Browne

Executive Editor, Supermarket News

Michael Browne joined Supermarket News in 2018 after serving in managing and executive editor capacities at leading B2B media brands including Convenience Store NewsLicense Global and Travel Agent. He also previously served as content production manager for print and digital in the Business Intelligence division of Informa, parent company of Supermarket News and Nation’s Restaurant News.

As executive editor, Mike oversees the editorial content of supermarketnews.com as well as the monthly print publication. He also directs all content-based brand-related projects including the annual Top 75 Retailers report, Category Guide, Retailer of the Year, research surveys and special reports, as well as podcast and webinar content. Mike has also presented and moderated at industry events.

In addition to the positions mentioned above, Mike has also worked as a writer and/or editor for special projects at American Legal Media (ALM), managing editor for Tobacco International, special projects editor at American Banker • Bond Buyer, and as production editor for Bank Technology News and other related financial magazines and journals published by Faulkner & Gray.

A graduate of Fordham University, Mike is based in New York City, where he was born and raised.

Contact Mike at [email protected] or follow him on Twitter and LinkedIn.

 

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