U.K. competition watchdog rejects sale of Walmart’s Asda to Sainsbury’s
The United Kingdom’s (U.K.’s) competition watchdog, Competition and Markets Authority (CMA) has rejected the proposed sale of Walmart owned supermarket brand Asda to Sainsbury’s.
Sainsbury’s is the 3rd largest chain of supermarkets in U.K. with a 16.9% share of the supermarket sector. On the other hand, Asda Stores Ltd. is a British supermarket retailer, which was founded in 1949 and is now a subsidiary of Walmart.
While rejecting the proposed deal, CMA observed that the deal is not in the larger interest of the consumer as it will lead to higher prices, lower quality goods and a poorer shopping experience.
The proposed sale valued Asda at U.S. $ 9.4 billion. The deal would have created a mega retailer with 2,800 stores and combined annual sales of U.S. $ 66 billion.
Speaking on the occasion, CMA Panel Inquiry Chair – Stuart McIntosh said, “It’s our responsibility to protect the millions of people who shop at Sainsbury’s and Asda every week. We have concluded that there is no effective way of addressing our concerns, other than to block the merger.”
Responding to CMA, the CEO of Sainsbury’s – Mike Coupe said, “The specific reason for wanting to merge was to lower prices for customers. Blocking the deal is “effectively taking £1 billion out of customers’ pockets.”
The CEO of Walmart International – Judith McKenna said, “Our focus now is continuing to position Asda as a strong UK retailer delivering for customers. “Walmart will ensure Asda has the resources it needs to achieve that.”
The Chief Executive Officer (CEO) of Asda – Roger Burnley said, “We were right to explore the potential merger with Sainsbury’s, which would have delivered great benefits for customers and supported the long term, sustainable success of our business.”
Sainsbury’s had earlier said that it will cut prices on a variety of everyday products by 10% over the first 3 years of the proposed merger. But the CMA, which had previously raised concerns about the deal, said the merger would lessen competition at both a national and local level.
Sainsbury’s and Asda had promised to sell between 125 and 150 of their supermarkets to allow the merger to proceed, along with some petrol stations and convenience stores. They had also pledged to bring in £ 1 billion of price cuts for consumers if the deal went through.
Sainsbury’s believes that CMA has misunderstood the potential impact of proposed deal on competition. It is to be noted that before rejecting the proposed sale, CMA had conducted surveys of 60,000 of the supermarkets’ customers.
Sainsbury’s is now working on a new commercial strategy to strengthen its position as a standalone company. Asda has a different issue as Walmart is keen on selling it off. Now with proposed sale rejected, Walmart may sell Asda to Private Equity (PE) investor.
