Sainsbury’s and Asda jointly announced that they are considering selling 125 to 150 supermarkets, including some of their smaller local stores if the much talked about merge is to go ahead.
Both supermarket giants are planning to also sell a selection of their petrol stations units, with Sainsbury’s personal pledge of capping fuel profits to no more than 3.5p a litre for five years.
In a much-publicised move, the supermarkets also vowed £1bn in price cuts, but the UK’s competition regulator said last month that it could block the merger between the two supermarkets if it found it necessary.
The Competition and Markets Authority (CMA) published some papers last week, which contained the supermarkets’ claims that consumers would not benefit from the proposed price cuts, should the proposed merger be blocked.
Sainsbury’s has a portfolio in excess of 1,400 stores in the UK, 800 of which are small convenience-type stores, while Asda has about 600. Both brands contested the CMA’s findings into the merger, which escalated into the UK regulator warning that the deal could be blocked if the two retailers do not sell off a large number of stores or even one of the brands. The two brands suggested that the CMA’s suggested remedy was impossible to roll out.
The brands reassured staff that there will be no store closures due to this merger, and any sold stores would be run by a credible third party.
What do other brands think of the merger?
The competition authority published some initial reactions to the publicised merger, from various large organisations, such as Waitrose and the National Farmers Union.
Waitrose said that they believe the merger should go ahead and that the possibility of having two large national retailers representing well over half of the groceries market would shift the dynamics of retail, comprehensively reducing competition at both national and local level, for both in-store and online activities.
What kind of retail presence will the two brands achieve by merging?
The proposed Asda and Sainsbury’s merger will become the UK’s biggest supermarket chain with around 31 per cent of the grocery market, crucially surpassing Tesco’s 27 per cent.
The new supermarket group will have combined revenues of £51billion and will aim to generate £500million in cost savings.
Both companies’ remaining stores will continue to trade under their separate brands, keeping the same names, and bosses will aim to make savings by sharing some back-room operations such as purchasing and distribution.