Daily Management Review

Talks Between Sainsbury And Walmart Ongoing For Purchase Of Asda By The U.K. Grocer


04/29/2018




Talks Between Sainsbury And Walmart Ongoing For Purchase Of Asda By The U.K. Grocer
A deal that would create the largest supermarket operator in Britain is being mulled by U.K. grocer J Sainsbury Plc. According to reports citing source information from the company, Sainsbury is contemplating acquiring its rival Asda from the current owners of the supermarket chain – WalmartInc. Of the U.S. The deal, if it goes through, is expected to run into billions of pounds.
 
Preliminary meetings and discussions have already been held between the representative of the two companies and it could be just weeks that an announcement of the deal would be made, said media reports quoting people with knowledge of the matter and who asked not to be identified because deliberations are private. The sources however also cautioned that the talks could end up[ being unsuccessful because no final agreement has been reached as yet.
 
If the deal goes through, which will see the second largest super market chain in the U.K – Sainsbury, getting combining forces with the third largest grocer in the British retail market – Asda, would create a new entity that would be larger than the market leader Tesco Plc. According to Kantar Worldpanel, each of the two companies have just under 16 per cent of market share in the grocery business in the U.K. and therefore. A combination of the Sainsbury and Asda will give it command over one third of the market and would be ahead of Tesco which has 28 per cent market share of the U.K. grocery industry.
 
There were no comments available from representatives for Sainsbury, Walmart and Asda.
 
There is a growing threat for the existing players in the British retailing market from Amazon.com Inc. and this forms the backdrop for the merger efforts. The Brexit-induced weakness of the pound has exacerbated the already existing price squeeze this has resulted in the supermarket operators forced to cut thousands of jobs to address the price squeeze. There would be greater leverage over suppliers by the combination of the two companies. It is this leverage over suppliers – given the market its dominance, that Tesco has used to keep its sourcing costs under check.
 
Asda was acquired by Walmart in 1999 for 6.7 billion pounds ($6.7 billion). And since that deal, it has been an uphill task for this U.K. grocer – which has low pricing as one of its USP, because of the tough competition from low cost German discounters - Lidl Ltd. and Aldi Stores Ltd. which has competed with Asda on its biggest selling point – low prices.
 
(Source:www.bloomberg.com)






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