Sainsbury’s boss fights for his job
£1.2bn wiped off supermarket after regulator leaves merger with Asda ‘dead in the water’
SAINSBURY’S boss Mike Coupe is fighting for his future after the grocer’s proposed £14bn merger with Asda was declared ‘dead in the water’.
In a ruling that stunned the City, the Competition and Markets Authority (CMA) warned the deal could lead to higher prices and less choice for shoppers.
the watchdog told the supermarket giants they could be required to sell hundreds of stores or even one of the brand names to get the deal through – or risk it being blocked.
In an ominous sign, the CMA added that it was ‘likely to be difficult’ for the chains to address its concerns.
Analysts warned Coupe’s days are numbered as the findings suggested the deal was likely to be blocked.
Sainsbury’s shares plunged 18.6pc – wiping £1.2bn off its value – in its worst day on the stock market for a decade. Coupe, 58, branded the findings ‘totally outrageous’, adding: ‘they have fundamentally moved the goalposts, changed the shape of the ball and chosen a different playing field.’
Neil Wilson, analyst at trading platform Markets, said: ‘ Investors are rightly accepting this deal is dead in the water. Coupe and co put all their eggs in one basket. you have to question what the plan is now and whether management will remain for long.’
Clive Black, analyst at Shore Capital, added: ‘the deal looks to have suffered a mortal blow. Sainsbury’s looks like it has misunderstood the consumer and the CMA.’
the findings are a devastating blow to Coupe, who masterminded the merger with Asda counterpart, Roger Burnley, 52, after two years of secret talks.
But it has been far from plain sailing. On the day the deal was announced last May, Coupe was left red-faced when caught singing We’re In the Money between interviews at a TV studio.
Over the Christmas period Sainsbury’s was the only Big Four supermarket to post a fall in sales, as they declined by 1.1.pc.
Speaking yesterday, Coupe insisted Sainsbury’s would pursue the deal. ‘In the end they are taking money out of customers’ pockets,’ he said. ‘ this is totally outrageous.’
the ruling was also a setback for US grocery giant Walmart, which owns Asda and is keen to offload the British supermarket. Coupe suggested the UK’s impending exit from the EU would make it impossible for Walmart to find a buyer. ‘A UK plc with Brexit looming, and a completely unpredictable set of competition rules – who would invest in this country?’ he said.
Sainsbury’s and Asda insisted the tie-up would lead to lower prices for shoppers. But the CMA disagreed. It identified 629 areas where it believes the merger would risk creating a substantial lessening of competition.
It also believes a deal could mean higher fuel costs at more than 100 locations where the two chains’ petrol stations overlap.
this could mean Sainsbury’s and Asda are forced to sell as many as 300 stores between them, rendering the deal economically unviable. Sainsbury’s and Asda have 2,800 stores between them.
the two supermarkets had planned to make £500m in savings, partly by squeezing large suppliers such as Marmite owner Unilever to get lower prices for customers. If they merge, they would have a combined market share of 31.2pc, according to latest Kantar Worldpanel data, ahead of tesco, which has 27.7pc.
But critics warned a tie- up would hurt smaller suppliers, forcing some to go bust. Scott Corfe, chief economist at thinktank the Social Market Foundation, said: ‘Rather than allowing supermarkets to merge themselves out of trouble, by bullying suppliers such as farmers to lower prices, we should be forcing these firms to try harder.
‘ they should be innovating rather than merging.’
the CMA is set to deliver a final verdict on the tie-up by April 30.
Stuart McIntosh, chair of the independent inquiry group carrying out the CMA’s investigation, said: ‘these are our provisional findings, and the companies and others now have the opportunity to respond to the analysis.
‘It’s our responsibility to carry out a thorough assessment of the deal to make sure that the sector remains competitive and shoppers don’t lose out.’