Stores merger ‘set to collapse’

Fears for Sainsbury’s if CMA bans deal

SAINSBURY’S could be in “considerable trouble” if watchdogs go ahead and block a mega-merger with Asda today, experts have warned.

Analysts predict the Competition and Markets Authority will reject the £12billion tie-up in its final report.

The CMA warned in February that the creation of Britain’s biggest supermarket group would be bad for shoppers.

Sainsbury’s and Asda hit back, vowing to pump £1bn a year into price cuts and offering to sell up to 150 stores. But experts reckon there is just a 20% chance of the merger being approved.

Investment bank JP Morgan predicted the CMA would either block the deal or slap a number of conditions on it.

“We think the former is significantly more likely,” it said.

Clive Black, an analyst at Shore Capital, said: “Sainsbury’s could be in quite considerable trouble if the CMA does not change its mind.

“Its business is not trading well, and it leads me to believe that there could be the potential for an earnings downgrade or even an official profit warning in the future.”

Sainsbury’s share price, down a third since last August, fell 1.6% ahead of today’s announcement.

Fiona Cincotta, from Cityindex.co.uk, said: “A complete block is the most likely outcome. If not, remedies that are so far-reaching that the two sides will decide to walk away from the deal.”

The collapse of the proposed merger could put the future of Sainsbury’s boss Mike Coupe in doubt, with the chain due to announce its full-year results next week against the background of falling sales.

Asda’s US owner, Walmart, could try to sell the chain if the deal is blocked, with private equity firms among the possible buyers.