BY Richard Summerfield
The UK’s second biggest food retailer, J Sainsbury’s, has agreed to acquire Walmart subsidiary Asda in a deal valued at £7.3bn.
The deal, which came as a shock to many, will likely generate a number of competition concerns, since it would create a new grocery superpower accounting for nearly £1 in every £3 spent on groceries on the UK high street.
The deal for Asda, the number three ranked UK supermarket chain, will see Walmart get nearly £3bn in cash and 42 percent of the newly-combined business. Walmart paid £6.7bn for Asda in 1999.
“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,” said David Tyler, chairman of Sainsbury’s. “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.”
The companies have confirmed that both the Sainsbury’s and Asda brands will be maintained and there are no planned store closures or disposals as a result of the combination. However, given that the combined company would have a workforce of around 360,000, there are significant concerns about an emerging duopoly in the sector. The UK’s Competition and Markets Authority has stated that it is likely to review the combination, which could have consequences for the workforce.
Joe Clarke, the acting national officer of the Unite union, noted that the deal could have implications for thousands of jobs. “Staff are already facing uncertainty through restructuring and changes to contracts at [Sainsbury’s]. Sainsbury’s bosses need to give workers clarity over what the future could hold and assurances over jobs as matter of urgency,” he said.
Roger Burnley, chief executive of Asda, said: “The combination of Asda and Sainsbury’s into a single retailing group will be great news for Asda customers, allowing us to deliver even lower prices in store and even greater choice. Asda will continue to be Asda, but by coming together with Sainsbury’s, supported by Walmart, we can further accelerate our existing strategy and make our offer even more compelling and competitive.”