Published: Tue, May 01, 2018
Worldwide | By Victor Meyer

Walmart's Asda to Merge With Sainsbury's

Walmart's Asda to Merge With Sainsbury's

LONDON, April 30 (Reuters) - British shares closed slightly higher on Monday, but the planned merger between Sainsbury's and Asda, the United Kingdom arm of Walmart, sent shockwaves through British retail stocks as investors sought to adjust to a potentially game-changing overhaul of the industry.

The combined company will be "designed for a new era" of retailing, bringing scale in clothing and general merchandise, Coupe said.

Sainsbury's said it will retain both the Sainsbury's and Asda brands, and it has no plans to close stores.

Richard Lim, CEO of Retail Economics, notes that if given the green light by the Competition and Markets Authority (CMA), the merger would be a "game changer" in the industry and could deliver price reductions across a range of products, putting it in a position to challenge Tesco and the discounters head-on. Sainsbury's market capitalisation stood at £5.9 billion at the close of business on Friday.

Meanwhile, Mamequa Boafo, senior analyst, retail, at GlobalData notes there is no doubt the proposed merger will lead to the consolidation of the supplier base of both parties, which will assist in leveraging margins across both businesses.

"Having worked at Asda before Sainsbury's, I understand the culture and the businesses well and believe they are the best possible fit".

More news: Everyone has same suggestion for Asda and Sainsbury's name after potential merger

The Forum of Private Business (FPB) has called on Sainsbury's to provide assurances to its supply chain, as the supermarket chain announces it has agreed terms with Asda to merge the two companies. At the time of completion of the combination, Walmart will not hold more than 29.9% of the total voting rights in the combined business. He says Walmart has spent the last four years selling assets, partnering with local companies and closing stores around the world to focus on markets with higher return. Walmart is reportedly in talks to buy a majority stake in Flipkart, India's leading e-commerce company, which would give it a foothold in an exploding online market.

That's the lesson for Mike Coupe after the chief executive officer of British grocer J Sainsbury was caught singing "We're in the Money", on camera as he prepared for a television interview. Asda will continue to be run from Leeds with its own CEO, Roger Burnley, who will join the group operating board of the combined business.

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

In Britain's fast-changing retail landscape, Sainsbury's previously bought catalogue retailer Argos in 2016 for £1.4 billion.

Instead, he said cost savings of at least £500m would allow the new group, which will account for almost £1 in every three £3 spent on groceries, to reduce prices by a tenth on many "everyday items". In the fiscal year ended January 31, its global sales rose 1.7 per cent, while its Walmart U.S. division rose 3.5 per cent.

The combined supermarkets will beat out industry giant Tesco to become the largest food retailer in the United Kingdom with about 26% market share, Jefferies says.

Like this: