CMA refuses Sainsbury’s Asda merger outright

CMA refuses Sainsbury’s Asda merger outright

The Competition Markets Authority (CMA) has called an outright halt to the proposed merger of Sainsbury’s and Asda, announced last year.

Following an in-depth investigation, a group of independent CMA panel members concluded that the deal would result in a substantial lessening of competition at both a national and local level for people shopping in supermarkets. This would mean shoppers right across the UK would be affected, not just in the areas where Sainsbury’s and Asda stores overlap.

The CMA also concluded the deal would:

  • lead to increased prices
  • reduced quality and choice of products,
  • a poorer shopping experience for all of their UK shoppers.

Mike Coupe, CEO of Sainsbury’s.

There are calls for Sainsbury’s, chief executive Mike Coupe to step down but retail analyst at Shore Capital, Clive Black,  who has been extraordinary critical of the proposal had some praise for Sainsbury’s head, Mike Coupe saying: “Mr Coupe has been bold in seeking this merger and should be praised for this ambition and idea generation.”

Reacting to the news Coupe said the CMA’s report: “Ignores the dynamic and highly competitive nature of the grocery market”. He added that he thought the CMA was “effectively taking £1bn out of customers’ pockets.”

Shares in Sainsbury’s dropped by 5% as investors reacted to the news.

Commenting on the proposed merger of Asda and Sainsbury’s, Judith McKenna, CEO of Walmart International, said: “We have been clear from the beginning of the proposed merger about two things. Firstly, that retail is rapidly changing and standing still is not an option, and secondly that we will always ensure our international markets are strong local businesses powered by Walmart.

“The UK remains one of the most competitive retail markets in the world and Asda’s seven consecutive quarters of year-on-year growth show it is a strong business with a clear strategy and focused leadership.

“It was against that backdrop that we decided to explore the proposed merger with Sainsbury’s – an opportunity which would have further strengthened the Asda business and delivered real benefits for UK customers.

“While we’re disappointed by the CMA’s final report and conclusions, 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.

“I would like to personally thank and recognize Roger and the entire Asda team for their incredible focus and approach during the merger process. They have had the customer at their heart at every step, and I know they will continue to do so.”

NPA expressed previous concerns about merger

The National Pig Association (NPA) had expressed ‘real concern’ over the potential implications of the deal for pig producers when the plans were announced a year ago. Sainsbury’s had said consumer prices would be cut by 10%.

“The cuts will have to fall somewhere and our concern is that primary producers – including pig farmers, who have frequently already operated on unfeasibly tight margins over the past 10 years – will bear the brunt,” NPA chairman Richard Lister said at the time.

Roger Burnley, CEO of Asda, commented: “Asda’s DNA is delivering low prices for hard working families and that will never change. 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.

Roger Burnley, CEO of Asda.

“We’re disappointed with their findings but will continue to find ways to put money back into customer’s pockets and deliver great quality and service in an ever changing and demanding market.

“I have always been hugely aware that the last year has been an unsettling time for all of our colleagues and am immensely grateful for their commitment and dedication during that time. Our focus is now on the most important job we all have – delivering for our customers.”

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