Walmart UK And Sainsbury On Verge Of $10B Merger Deal

Sainsbury, the U.K. grocery store operator, and its rival Asda, which is owned by Walmart, are holding discussions about a merger that would create the country’s largest supermarket company.

Reuters, citing Sainsbury, reported that the two are in advanced talks and that an announcement could come as soon as Monday (April 30). The company invited the media and analysts to a presentation, which Reuters said indicates that the deal has been finalized. Walmart and Asda declined to comment to the media.

Sky News said the deal could be valued at more than 10 billion pounds. If a deal were to happen, the combined company would be worth $20.7 billion, reported Reuters.

While Sainsbury wouldn’t provide details as to how the deal is being structured, a source with knowledge of the situation told Reuters the holding company of the combined group would keep the Sainsbury name, and that Sainsbury’s CEO, Mike Coupe, would lead the company.

The deal – which marks the largest supermarket merger in the U.K. since the tie-up of Morrisons and Safeway back in 2004 – comes as the country’s food market industry is embroiled in a fiercely competitive battle. Meanwhile, three sources with knowledge of the situation said that Walmart would get a minority stake in the newly merged supermarket group, but would be the biggest shareholder with a roughly 40 percent stake. The group is expected to remain listed in the U.K.

“Asda doesn’t have discount and it doesn’t have convenience. This (deal) provides a potential solution for Walmart to deliver a more profitable Asda in the long run,” said Shore Capital analyst Clive Black.

A big question mark is whether or not the Competition and Markets Authority (CMA) in the U.K. would sign off on the deal, since it would create a duopoly with Tesco, the other major supermarket player. Those concerns may be unfounded, given the CMA’s surprise support for Tesco’s deal to buy wholesaler Booker.

“It’s going to be a really big test of the CMA’s understanding of the market and whether it believes that this deal is in the consumer’s interest,” Black told Reuters. “It’s hard to believe it would not require considerable store disposals and there aren’t many buyers out there.”