One of the largest deals in the history of UK supermarket segment is about to take place after a long time on Monday when Sainsbury and Asda, the UK arm of Walmart come together in a ‘merger’.
The deal which is a win-win situation for both will place the combined group in the number one position in UK’s supermarket segment usurping the place of Tesco who holds the largest market share of the grocery segment. The market share of the combined group would total to 31.4% as against 27.6% of Tesco. As per reports, the value of the deal is estimated to be around 10 billion plus pounds. An announcement in this context is expected to be made on Monday. The combined group’s holding company would be headed by Mike Coupe, the Chief Executive of Sainsbury and a former employee of Asda.
The deal will enable both the grocery stores to gain a competitive position through larger buying power. It will help them to combat the rising threat of discounters who were making large erosions into their individual profit margins. Walmart found a way out for making its international businesses profitable and that was by partnering with the local players. And in the UK it is doing just that! However, nothing is known about Walmart’s stake in the ensuing merger with differing figures floating in the market on it.
However, with the deal leading to the creation of a duopoly, the fear of regulatory hurdles coming into the clinching of the deal could have been a worrying one! But the waving through of a similar deal struck by Tesco with Booker by the Competition and Markets Authority (CMA) may have made the going easier for Sainsbury and Walmart.
Whether the CMA takes a considerate view of the deal and finds it in the interests of the consumer is yet to be seen. That will decide the fate of UK’s two top grocers!