Sainsbury shares surge as Asda deal unveiled

Robyn Valdez
May 1, 2018

It comes after supermarket giants Asda and Sainsbury's confirmed that terms have been agreed to merge the two chains.

However, the merger would have to be approved by the Competition and Markets Authority (CMA).

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"Both Sainsbury's and Asda have significant stakes in the clothing market, with forecast share for 2018 at 2.1% and 3.5% respectively."

". There are no plans to close any stores in the Asda or Sainsbury's portfolio and both retail businesses will be maintained, resulting in a network of more than 2,800 Sainsbury's, Asda and Argos stores.

Tesco slipped 0.9 percent to 235.9 pence on concerns the group could lose its supermarket crown and possibly also the title of Britain's biggest retailer.

Bringing together Britain's second-and third-largest supermarket groups could generate the savings and buying power to help them better compete with fast-growing German discounters and growth at Tesco after its purchase of wholesaler Booker.

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If coupled with Asda's successful George clothing line, the combined business could stand as a competitor to the likes of United Kingdom value clothing retailers such as Primark.

Sainsbury's is valued at around £5.9 billion.

Sainsbury's CEO Mike Coupe said he was "100 percent confident" that no stores would be closed because of the deal.

However the CEO was forced to apologise after he was caught on camera singing "we're in the money" between interviews following the merger announcement, blaming the episode on "an unguarded moment". "It was an unfortunate choice of song, from the musical 42nd Street which I saw previous year and I apologise if I have offended anyone".

"The nature of the United Kingdom market is incredibly competitive and customers have a huge amount of choice and they exercise that choice".

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Walmart will be a long-term shareholder and partner and will leverage its global scale and investment to support the combined business.

"We believe the combination offers a unique and exciting opportunity that benefits customers and colleagues", said President and Chief Executive Officer Doug McMillon, according to a press release.

"We look forward to working closely with Sainsbury's to deliver the benefits of the combination".

It goes on to explain that the newly-combined company has found £500 million of cost savings by comparing sourcing books and taking on lower prices for comparable products. The combined group would have a combined market share of 31.4%, based on figures from Kantar for the 12 weeks ended March 25, compared with Tesco's 27.6%.

News of Sainsbury's return to growth in its last fiscal year was dwarfed by confirmation this morning (30 April) of the United Kingdom retailer's merger intentions with rival supermarket Asda, in a move that could challenge rival value clothing retailers in the UK.

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Sainsbury's was launched by a young couple, John James Sainsbury and Mary Ann Staples, when they opened a small London dairy shop on the day they married in 1869, according to the company's website.

Other reports by Info About Network

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