Sainsbury's and Asda merger will be 'pivotal' for the United Kingdom retail market

Sainsbury's and Asda merger will be 'pivotal' for the United Kingdom retail market

Asda and Sainsbury's announced the merger of the United Kingdom supermarket giants which will see lower prices in the stores, according to management.

Yesterday, Sainsbury's confirmed that it has agreed terms of a £12 billion (€13.6 billion) merger with Asda - owned by USA supermarket giant Walmart - in a daring move to overtake Tesco as Britain's largest supermarket group.

The gaffe, covered widely in the British media, came after the news that Sainsbury will acquire Walmart Inc.'s Asda in a US$10 billion deal.

The deal has also made Coupe significantly richer.

Sainsbury's is valued at around £5.9 billion.

However, the merger would have to be approved by the Competition and Markets Authority (CMA). "We see no chance of it getting through the CMA without a major dismemberment of the combined business", said Peel Hunt analyst Charles Hall.

Sainsburys have claimed the proposed deal would not lead to store closures or job losses, and would see consumer prices fall.

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Overall, the British grocery market grew at its slowest rate since March past year at two per cent due to lower grocery prices.

According to the newspaper both Asda and Sainsbury's source between £50 million and £300 million from suppliers and producers in the Republic of Ireland and Northern Ireland each year.

He said: "In terms of Sainsbury's merger with Asda, it is a great pity that the management of two big corporations can not come up with a better and more constructive idea than a merger".

He added that Sainsbury's acquisition of Asda's big stores could create a new outlet for Sainsbury's Argos stores.

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

Bernstein's Bruno Monteyne pointed to the risks of bringing together companies with different cultures, noting Morrisons-Safeway lost 28 percent of their sales through a combination of store sales, integration problems and culture clash when they merged in 2004. It'll own 42 percent of the combined company, with 29.9 percent of the voting rights. Two Walmart representatives will join the board as non-executive directors.

The Qatar Investment Authority, now the largest shareholder in Sainsbury's with a 22 per cent stake, said it supported the deal.

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