Sainsbury's and Asda close to UK retail merger

28 Apr 2018 --- J Sainsbury and Wal-Mart, the world's biggest supermarket retailer, are in advanced talks about a tie-up that would create ‎a more powerful rival to Tesco, the UK market leader. A merger between the UK’s second and third largest supermarket chains would create a new group with huge shares of the market in food, clothing, household goods and toy retailing that would be more powerful than Tesco.

Sainsbury’s has confirmed to FoodIngredientsFirst that the talks are ongoing following reports on Sky News and the newswire Bloomberg earlier today. The statement read: “J Sainsbury plc ("Sainsbury's") notes the speculation concerning a possible combination with Asda Group Limited ("Asda"). Sainsbury's confirms that it and Walmart Inc. are in advanced discussions regarding a combination of the Sainsbury's and Asda businesses. A further announcement will be made at 7am on Monday 30 April.”

Sky News reports that it is still unclear how a deal would be structured, including whether Wal-Mart would reverse Asda into Sainsbury's while taking a big stake in the combined group.

Sainsbury’s already owns Argos while Asda’s George clothing brand vies with Marks & Spencer and Primark to sell the most clothing in volume terms. The enlarged supermarket group would have nearly 3,000 stores and annual sales of more than £50bn. Sainsbury’s has a network of more than 1,400 supermarkets and convenience stores while Asda has around 600 stores. Sainsbury’s also has 800 Argos outlets.

Any proposed deal is likely to be closely scrutinized by the competition watchdog over concerns it would reduce competition and tighten the grip the four major supermarket chains – Tesco, Sainsbury’s, Asda and Morrisons – on the UK grocery market.

The deal comes at a time of major upheaval in the UK retail sector as Aldi and Lidl become increasingly powerful and the cost of running high street stores increases because of higher business rates and labor costs. 

Sainsbury’s is also looking for ways to boost up its market position in the wake of Tesco’s recent takeover of Booker. That deal increased Tesco’s buying power by creating a food group with sales of £57.5bn.