Asda to make U.K. concessions
Walmart unit, rival to sell some stores in merger move
Walmart Inc.’s U.K. unit, Asda, and British supermarket chain Sainsbury’s say each will sell some stores and make other concessions to gain approval from regulators scrutinizing their proposed merger.
In a joint statement released Tuesday, the two companies said they recently submitted their responses to the U.K.’s Competition and Markets Authority. In a provisional ruling on Feb. 20, the regulatory agency said the merger would raise prices and reduce quality and choices for shoppers.
The agency’s report identified 629 places throughout the U.K. where the merger would create competition concerns. The report stated the companies would likely have to sell a “significant” number of stores to get the deal approved.
Walmart agreed in April to sell Asda to Sainsbury’s for about $10 billion, keeping a 42 percent stake in the merged company. Sainsbury’s is the U.K.’s second-largest supermarket chain, and Asda the third-largest. Their merger would place them ahead of current market leader Tesco.
If the deal is approved, it could close in the second half of this year.
The companies said in Tuesday’s statement that they “strongly disagree” with the provisional report, and “have found the CMA’s analysis of their proposed merger to contain significant errors.” They said the agen-
cy’s threshold for identifying competition problems is set too low, “therefore generating an unreasonably high number of areas of concern.”
“In their detailed response to the Provisional Findings, Sainsbury’s and Asda have sought to address these economic and legal errors,” the companies said in the statement.
Besides selling off enough supermarkets “to satisfy reasonable concerns regarding any substantial lessening of competition as a result of
the merger,” Asda and Sainsbury’s said they would deliver $1.3 billion in lower prices annually by the third year after the merger. “This would reduce prices by around 10 percent on everyday items,” they said.
Sainsbury’s also will cap its fuel gross profit margin for five years, and Asda will maintain its existing fuel pricing strategy. In addition, the price commitments will be independently reviewed and the results published each year.
Sainsbury’s chief executive Mike Coupe and Asda chief executive Roger Burnley said in the statement, “We are trying
to bring our businesses together so that we can help millions of customers make significant savings on their shopping and their fuel costs, two of their biggest regular outgoings.”
The regulatory agency is expected to publish the companies’ full response “in due course,” and to issue its final report by April 30.
Walmart acquired Asda in 1999 for $10.8 billion in what was its largest transaction until it bought a majority stake in Indian e-commerce firm Flipkart Group in May for $16 billion. That deal, finalized in August, also has run into regulatory roadblocks.