Asda and Sainsbury’s £14bn merger at risk

Watchdog warns it could block deal over higher prices

MILLIONS of shoppers would face higher food and fuel prices under a planned merger of Sainsbury’s and Asda, the competition watchdog has warned.

The supermarket giants could be forced to sell off as many as 300 stores if they want to get the deal over the finish line – and may face it being blocked altogether, the Competition and Markets Authority (CMA) said.

It also suggested it could force the sale of one of the brands under the £14billion merger, meaning either Asda or Sainsbury’s could disappear completely.

The ruling sent Sainsbury’s shares tumbling nearly 19 per cent and left the proposed deal hanging in the balance.

The CMA said: ‘We have provisionally found that, should the two merge, shoppers could face higher prices, reduced quality and choice, and a poorer overall shopping experience across the UK… we also have concerns that prices could rise at a large number of their petrol stations.’

The watchdog said it had found ‘extensive’ competition concerns relating to the merger. These include 100 locations where Sainsbury’s and Asda petrol stations overlap, which could lead to higher fuel prices.

The CMA added it was ‘likely to be difficult’ for the supermarkets to address these concerns.

It is a crushing blow to Sainsbury’s and Asda, which were hoping to join forces in an effort to take on the growing threat of German discounters Aldi and Lidl.

The announcement wiped £1.2billion off the market value of Sainsbury’s as investors prepared for the deal to fall through. And it means Asda’s US owner, supermarket titan Walmart, is likely to be forced back to the drawing board as it seeks a quick exit from the UK.

Sainsbury’s and Asda yesterday said: ‘We are surprised that the CMA would choose to reject the opportunity to put money directly into customers’ pockets.’

The planned merger would create a supermarket giant with 330,000 staff and 2,800 stores. The combined group would overtake Tesco as the UK’s biggest supermarket, achieving a 31.2 per cent market share.

The pair are looking to make £500million in savings, partly by squeezing lower prices out of suppliers, some of which they plan to pass on to customers.

But critics yesterday said the supermarkets should walk away and go back to business as normal. Russ Mould, of investors A J Bell, said ‘there is little chance of Sainsbury’s and Asda coming together’.

The CMA will deliver its final verdict on the merger by April 30.