For Sainsbury and Asda, CMA’s analysis leaves planned merger in serious doubt
LONDON: Sainsbury’s planned 7.3 billion pound (US$9.5 billion) takeover of Walmart’s Asda can only be salvaged if Britain’s competition regulator fundamentally changes its analysis of Britain’s grocery market, experts said.
That’s unlikely, say competition lawyers, analysts and company insiders, so the proposal will most likely fail.
The Competition and Market Authority’s (CMA) provisional view, published on Wednesday, was the deal should be blocked in the absence of the sale of a large number of stores, or even one of the brands.
It acknowledged the two companies were unlikely to be able to address its concerns.
“The only way you get there is you have to have the CMA do a fundamental u-turn on the way they’ve appraised it,” said one person familiar with Sainsbury’s thinking. “And if they (the CMA) are playing the politics, then there’s no chance they’re going to do that.”
Sainsbury and Asda have until March 13 to respond to the CMA’s provisional findings and until March 6 to respond to its suggested divestment remedies. The CMA will then publish its final report by April 30.
Competition lawyers said there are few precedents for the CMA to dramatically revise its findings between provisional and final reports.
Sainsbury and Asda’s key argument has been that Britain’s grocery market is changing rapidly, driven by the growth of online and a broader range of competitors, most notably discounters Aldi and Lidl.
However, the CMA effectively said that while new entrants are a force, it is the big four grocers - market leader Tesco , Sainsbury, Asda and Morrisons - who are most in competition with each other, making the Sainsbury-Asda deal a “four to three” merger.
Lawyers said Sainsbury and Asda would have to come up with new evidence to change the CMA’s thinking. — Reuters