SAINSBURY’S £15 bn SUPER MERGER
Unexpected item in bagging area as supermarket giant shocks City with bid to join Asda and create Britain’s biggest grocery chain
SAINSBURY’S and Asda are in talks over an astonishing £15 billion mega-merger to create Britain’s biggest supermarket chain.
Sainsbury’s confirmed last night that it is in ‘advanced discussions’ with Asda, owned by American giant Walmart.
Sainsbury’s and Asda have combined sales of £50 billion a year and a merger is likely to mean lower prices for shoppers.
The tie-up is seen as a response to the relentless rise of German discounters Aldi and Lidl, which have been chipping away at the big supermarkets over the past few years, as well as online operations such as Ocado.
Lidl and Aldi now have a combined market share of 12.6 per cent – more than fourth-largest grocer Morrisons. Tesco is currently the country’s largest food retailer.
But the combination of Asda and Sainsbury’s, which together employ more than 350,000 staff, will leapfrog into the number one slot. However, shoppers would initially see little change, with stores still operating under their present names.
T h e n e ws of the merger has shocked the City and has been greeted with alarm by trade unions, which fear stores will be closed and thousands of jobs lost. There are also concerns over pensions.
Shopworkers’ union Usdaw is seeking ‘ urgent talks’. National officer Joanne McGuinness said: ‘Our priorities will be to protect our members and ensure any deal between the retailers does not impact on their jobs or incomes.’ Sainsbury’s and Asda declined to comment but sources say that there are no plans for larges cal e r edundancies or shop closures. One source familiar with the situation said: ‘We all know what Aldi and Lidl have done to the grocery market and everyone is trying to work out what an online future is going to look like. ‘This deal is about creating a long-term, competitive business – one that would ultimately lead to lower prices.’
The combined group would control about a third of the grocery market. Both have also made significant efforts to add to their food ranges by selling more clothing, electrical and home goods, including Sainsbury’s Tu clothing and Asda’s George.
It is understood Walmart may keep a minority stake in the British business. That means a combined operation could benefit from the Americans’ vast buying power, helping slash prices for electronics, clothes and toys. Walmart declined to comment.
The proposed deal will come under intense scrutiny from the Competition and Markets Authority to make sure the combined business does not monopolise the sector.
However, most analysts expect the merger to go through, although Sainsbury’s and Asda could be told to sell or close stores in areas where they are too dominant.
Retail expert Nick Bubb said: ‘This has come like a bolt from the blue. Sainsbury’s boss Mike Coupe is looking to defend the chain from competition from Tesco, discount retailers such as Aldi and Lidl, and online retailers such as Amazon and Ocado. The deal is a worry for smaller players such as Waitrose and Morrisons.’
‘This deal will lead to lower prices’