Britain’s second and third biggest supermarket chains Sainsbury’s and Walmart-owned Asda have agreed to merge, the pair said Monday, creating a £13-billion ($18-billion, 15-billion-euro) retail king that would leapfrog Tesco.
The blockbuster deal comes as the UK retail sector faces squeezed profit margins due to fierce competition from German-owned discounters Aldi and Lidl — as well as online players like US titan Amazon.
The news sent Sainsbury’s share price spiking more than 20 per cent in initial deals on the London stock market, while Tesco sank almost four per cent on fears the group could lose its retail crown.
“Sainsbury’s and Walmart Inc. are pleased to announce that they have agreed terms in relation to a proposed combination of Sainsbury’s and Asda Group Limited, a wholly owned subsidiary of Walmart, to create an enlarged business,” they said in a statement after confirming advanced talks over the weekend.
The transaction values Asda at £7.3 billion. Sainsbury’s stock market capitalisation stood at £5.9 billion at the close of business on Friday.
Walmart will own 42 per cent of the combined business and receive £2.97 billion in cash, while Sainsbury’s will hold a majority stake.
“This is a transformational opportunity to create a new force in UK retail, which will be more competitive and give customers more of what they want now and in the future,” said Mike Coupe, chief executive at Sainsbury’s.
