Further to the announcement made over the weekend, Sainsbury’s has confirmed plans to merge with Asda, owned by US giant Walmart.
This move would see the combination of the UK’s second and third largest supermarkets come together in creating combined revenues of £51 billion.
Walmart will retain a 42% stake in the newly-merged company following the £2.97 billion deal.
Commenting on the Combination, David Tyler, Chairman of Sainsbury’s, said: “We believe that the combination of Sainsbury’s and Asda will create substantial value for our shareholders and will be excellent news for our customers and our colleagues. As one of the largest employers in the country, the combined business will become an even greater contributor to the British economy.
“The proposal will bring together two of the most experienced and talented management teams in retail at a time when the industry is undergoing rapid change. We welcome Walmart as a significant shareholder and look forward to working closely with them.”
Sainsbury’s chief executive Mike Coupe said the deal would lead to no store closures and no job losses in stores, with the merge aiming to generate £500 million in cost savings.
He said: “This is a transformational opportunity to create a new force in UK retail, which will be more competitive and give customers more of what they want now and in the future. It will create a business that is more dynamic, more adaptable, more resilient and an even bigger contributor to the UK economy.
“Having worked at Asda before Sainsbury’s, I understand the culture and the businesses well and believe they are the best possible fit. This creates a great deal for customers, colleagues, suppliers and shareholders and I am excited about the opportunities ahead and what we can achieve together.”
The acquisition will need the approval of the Competition and Markets Authority and will be expected to complete by the second half of 2019.
Analysis: Russ Mould, AJ Bell investment director
Assuming the Competition and Markets Authority lets the deal pass relatively unhindered – and the manner in which it waived through the Tesco-Booker deal suggests it might – then the next decision that will follow the proposed Sainsbury-Asda merger is Morrisons’ competitive response/
The defensive merger between two rivals may well force the Bradford firm to seek out a merger or a deal of some kind with the Co-op. Although this will not make a huge dent in the market share gap between Morrisons and Tesco and the proposed Sainsbury-Asda entity, such a move would at least take Morrisons’ market share back above the combined reach of the discounters Aldi and Lidl, who continue to act as a disruptive force in the UK grocery market.