Britain's Sainsbury's to buy supermarket chain Asda from Walmart for $10.1 billion

Oscar PerryMay 01, 2018

Both the Sainsbury's and Asda brands would be retained, and Sainsbury's said there are no plans to close any stores, stating that there will be more opportunities for the combined workforce of more than 330,000 "at all levels".

Analysts said the deal was a bet that recent changes in the retail industry - including the rise in online shopping, hard discounters and Tesco's purchase of Booker - would ease any opposition from competition regulators.

However, the FPB is concerned by comments made by Sainsbury's CEO Mike Coupe this morning, referring to the new larger supermarket being able to achieve better discounts from suppliers.

Sainsbury's said the $10 billion deal would save the company nearly $700 million a year, and its shares rose after the news of the merger hit.

"The vast majority of colleagues in both businesses are employed in stores".

"Given that shorting retailers has been a huge trade over the past two years, news of a potential tie-up between Sainsbury, the UK's second-biggest supermarket (chain) and seventh most shorted stock, and Walmart subsidiary Asda could see many caught on the wrong side of the bet in early trade on Monday", the broker explained.

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

Sainsbury's is valued at around £5.9 billion.

Mr Coupe said: "This is a transformational opportunity to create a new force in United Kingdom retail, which will be more competitive and give customers more of what they want now and in the future".

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For the year ended 10 March, Sainsbury's said clothing sales came in ahead of the market with 3.8% growth thanks to the company's strategy of offering customers high street style at supermarket prices.

"It will create a business that is more dynamic, more adaptable, more resilient and an even bigger contributor to the United Kingdom economy". Asda has a strong presence in the north of England and Sainsbury's in the south.

"We think it is a great deal all around".

The government informed parliament that Business Secretary Greg Clark had held talks with Sainsbury's, Asda and unions over preserving jobs.

Sir Vince said the CMA should force the companies to sell off stores if the merger meant the new giant was dominant in a particular area, telling the watchdog's new chief, Andrew Tyrie, to "get tough with monopolies".

The Labour Party's business spokeswoman, Rebecca Long-Bailey, has already called for an investigation of the proposed deal.

Shares in Sainsbury's rocketed 20% at the market open as investors interpreted the deal as a boon for the firm. Shares in Tesco fell by almost 1% while Morrisons were off 1.2%.

Separately, Sainsbury's revealed that its full year pre-tax profit fell 19% to £409 million.

Generating net synergies, post-price investments, across the enlarged group of at least £500 million.

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