Sainsbury’s and Asda £13bn merger to leapfrog Tesco

Supermarket giant Asda has agreed to a proposed merger with Sainsbury’s, worth £13bn.

Sainsbury’s CEO Mike Coupe said no stores will be closed and no shop floor jobs will be lost as a result of the merger. He added: “It will enable us to bring prices down, to improve quality, to improve ranges and to bring the power of Walmart in the form of buying of general merchandise and in the form of their systems and investments to the UK.”

The merger of the two supermarkets will create a business with a 31% share of the grocery sector, overtaking current leader Tesco on 28%. The combined revenue of both groups is estimated to be £51bn and one in three retail pounds will be spent with the new group.

Both companies will be chaired by current Sainsbury’s chairman, David Alan Tyler, and led by the Sainsbury’s CEO Coupe, and CFO Kevin O’Byrne. Asda will continue to be run from Leeds with its own CEO, Roger Burnley, who will join the group operating board of the combined business.

In a statement Sainsbury’s said bringing the two groups together will result in a “more competitive and resilient business that will be better able to invest in price, quality, range and the technology to create more flexible ways for customers to shop”.

Sainsbury’s latest financial results, released this morning, showed the group’s profit before tax was £589m, driven principally by efficiency savings across the group and improved food margin trends. Profit expectations for 2018/19 period is estimated to reach £629m and the group’s shares jumped by almost 20%, from £2.80 to £3.22, after the announcement of the merger.

Coupe said: “This is a transformational opportunity to create a new force in UK retail, which will be more competitive and give customers more of what they want now and in the future. It will create a business that is more dynamic, more adaptable, more resilient and an even bigger contributor to the UK economy.”

Roger Burnley, CEO of Asda, added: “The combination of Asda and Sainsbury’s into a single retailing group will be great news for Asda customers, allowing us to deliver even lower prices in store and even greater choice.

“Asda will continue to be Asda, but by coming together with Sainsbury’s, supported by Walmart, we can further accelerate our existing strategy and make our offer even more compelling and competitive.”