Sainsbury’s and Asda in merger talks

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Merger talks between British supermarket chains Sainsbury’s and Asda are at a reasonably advanced stage, BBC business editor Simon Jack confirmed.

The two brands are expected to be retained should a merger go ahead.

Sainsbury’s and Asda – the UK arm of Walmart – are the second and third largest supermarkets in the UK.

The combined group would comprise 2,800 stores and would represent around 30% of the UK grocery market – similar to that of market leader Tesco.

George MacDonald, editor of Retail Week, said the grocery industry had been shaken up by low-cost supermarkets such as Aldi and Lidl.

“So maybe this type of mega deal will get the go ahead by the Competition and Markets Authority,” he said.

“This is quite audacious by Sainsbury’s – given it has only recently bought Argos. It’s symptomatic though of the restructuring of the supermarket industry.”

Sainsbury’s took over catalogue retailer Argos and Habitat for £1.4bn in 2016.

In 2017, Tesco merged with Booker – the UK’s largest food wholesaler.

‘Different customers’

Analysis, by BBC business editor Simon Jack

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The two parties realise that the Competition and Markets Authority (CMA) will have some serious questions to ask.

Sainsbury’s concedes that some store disposals will be required to satisfy them, so the 30% market share figure may well go down.

Having said that, sources close to the deal say the market has changed in the last few years and point to the Tesco Booker merger as evidence that the CMA understands that.

Sainsbury’s is continuing to integrate Argos into its network and sees an opportunity to roll out Argos in Asda stores.

The two brands will be retained as they appeal to a different customer but they see a good geographical fit, with Asda stronger in the north and Sainsbury’s in the south.