Published: Tue, May 01, 2018
Money | By Hannah Jacobs

Sainsbury's shareholders back merger with Asda

Sainsbury's shareholders back merger with Asda

The blockbuster deal - which is effectively a takeover bid with Sainsbury's acquiring a 58-percent stake in the combined group and Walmart the remainder - comes as long-established United Kingdom supermarkets battle fierce competition from German-owned discounters Aldi and Lidl and online USA titan Amazon.

Shadow business secretary has warned Rebecca Long-Bailey said a "duopoly" of the big supermarkets would emerge, which she said could be at the expense of manufacturers, suppliers and farmers while both Leeds West MP Rachael Reeves and Leeds Central MP Hilary Benn demanded assurances from Government that Asda's Leeds headquarters and its around 2,000 staff would be protected.

"This is a transformational opportunity to create a new force in United Kingdom retail", Sainsbury's CEO Mike Coupe said.

The gaffe, covered widely in the British media, came after the news that Sainsbury's will acquire Walmart's Asda in a US$10 billion ($14.2b) deal.

The CEO of Sainsbury's has apologised after he was caught on camera singing "We're in the money" following the Asda merger announcement.

Analysts said the new group could be forced to sell off some existing stores, most likely in areas where they'd be left with no rival competition.

"It was an unfortunate choice of song, from the musical 42nd Street which I saw a year ago and I apologise if I have offended anyone", added Coupe, a large shareholder in Sainsbury's.

Judith McKenna, president and chief executive officer of Walmart International, said: "This proposed merger represents a unique and bold opportunity, consistent with our strategy of looking for new ways to drive international growth".

Britain's Competition and Markets Authority (CMA) said they will carry out a review of the merger that will create Britain's biggest retail store group, accounting for a 30-percent share of the market and knocking Tesco off the top perch.

The combination of Sainsbury's and Asda would control nearly a third of the United Kingdom grocery market, putting it ahead of Tesco.

The planned combination of J Sainsbury plc and USA -owned Asda Group Limited was announced by the two companies in an official statement on Monday.

"The transaction will, however, attract regulatory scrutiny, given that the merged companies will become the largest grocery retailer in the United Kingdom".

The last big deal by Sainsbury's, which has a market value of £5.9 billion, was its £1.4 billion purchase of Argos in 2016.

At the same time, Amazon has ramped up its "Fresh" delivery service in Britain, amid speculation that it could decide to buy a United Kingdom supermarket group.

Sainsbury's opened its first shop in London in 1869, with the family business climbing to become one of the biggest store names in Britain.

Walmart will receive £3 billion in cash and a 42 per cent stake in the combined business' equity, valuing Asda at about £7.3 billion.

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