Sainsbury’s in $10b swoop on Asda

New entity would overtake Tesco in UK market share; Walmart will own 42% stake of enlarged business

Sainsbury’s has agreed to buy Walmart’s Asda for about £7.3 billion ($10 billion, Dh36.7 billion) to create Britain’s biggest supermarket group by market share, overtaking long-standing industry leader Tesco.

Bringing together Britain’s second- and third-largest supermarket groups could generate the savings and buying power to help them better compete with fast-growing German discounters and growth at Tesco after its purchase of wholesaler Booker.

The cash and shares deal could also provide a potential exit route for Walmart, as Asda, which it bought in 1999 for £6.7 billion, has been struggling to grow over the last five years as discounters Aldi and Lidl attract its priceconscious customers.

Sainsbury’s shares jumped as much as 21 per cent to 327.1 pence in early trading yesterday, their highest since July 2014, while shares in rivals Tesco and No. 4 Morrisons fell.

Walmart will receive £3 billion ($4.1 billion) in cash and a 42 per cent stake in the combined business’ equity, valuing Asda at about £7.3 billion.

Analysts said the deal was a bet that recent changes in the retail industry — including the rise in online shopping, hard discounters and Tesco’s purchase of Booker — would ease any opposition from competition regulators.

Together Sainsbury’s and Asda have 2,800 stores.