UK: Sainsbury’s and Asda announce merger agreement

Supermarket chains Sainsbury’s and Asda, the 2nd and 3rd leading players in UK grocery retail respectively, have announced that they have reached an agreement to merge the two business in a deal that is set to shake up the UK supermarket sector.

“The Combined Business will create a dynamic new player in UK retail with an outstanding breadth of products, delivered through multiple channels”, the two firms said in a statement. The new entity would have combined revenues of over £50 billion ($68.75 billion) and would be set to overtake Tesco as the UK’s leading supermarket chain by market share.

The merger will see Asda’s US parent Walmart holding 42% of the issued share capital of the combined business as well as receiving a cash payout of around £2.975 billion ($4.1 billion), valuing Asda at approximately £7.3 billion ($10 billion) on a debt-free, cash-free and pension-free basis, the firms said.

Noting that the new business would “enable investment in areas that will benefit customers the most: price, quality, range”, the companies said that they aimed to “lower prices by c.10 per cent on many of the products customers buy regularly”. The combined network of stores, including Sainsbury’s Argos chain, will be over 2,800.

Commenting on the deal, Sainsbury’s chairman David Tyler 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”.

Source: Sainsbury’s