Walmart to sell U.K. unit as it focuses on other international markets

LONDON — Walmart is selling its British unit, Asda, to local rival Sainsbury’s for 7.3 billion pounds (US$10.1 billion), a deal that lets the world’s largest retailer focus on online sales in countries where it has stronger growth prospects and faces less-intense competition.

The cash and stock deal will reshape Britain’s supermarket industry. It combines the No. 2 and No. 3 supermarket chains, with a total 31.4 per cent share of the market that would put it ahead of the current leader, Tesco, according to data from Kantar Worldpanel.

Walmart overall is building fewer big stores and increasing its focus on internet businesses as people shop more online and at sites like Amazon. The company is expanding services like sameday delivery in the U.S., while focusing on big prizes overseas like China and potentially India. Walmart is reportedly in talks to buy a majority stake in Flipkart, India’s leading e-commerce company, which would give it a foothold in an exploding online market.

“Given the competitive landscape in U.K. grocery retail, profitable growth and expansion opportunities are limited, so reducing resources makes sense — especially when there are other geographies and channels” with more opportunity for growth, said Moody’s Lead Retail Analyst Charlie O’Shea.

In Britain’s grocery market, discounters have taken market share from traditional chains such as Sainsbury’s and Tesco. Asda was also fighting to compete with no frills German-based discounters Aldi and Lidl, which offer sharp discounts but limited assortments.

The deal with Sainsbury’s is “consistent with our strategy of looking for new ways to drive international growth,” Judith McKenna, CEO of Walmart’s international business, said in a statement.

Walmart will receive 4.3 billion pounds worth of Sainsbury’s stock and 2.98 billion pounds in cash. It’ll own 42 per cent of the combined company, with 29.9 per cent of the voting rights.

The combination joins Asda’s strong presence in northern England with Sainsbury’s larger operation in the south, creating a company with more than 2,800 stores across the country and 51 billion pounds of annual revenue.

Sainsbury’s said it will retain both brand names and has no plans to close stores.