Sainsbury is said to consider buying Asda from Walmart
The talks are an effort by Sainsbury to gain scale in a brutally competitive retail market where department-store chain BHS, electronics retailer Maplin and the UK arm of Toys ‘R’ Us have gone bust
London: UK grocer J Sainsbury Plc is considering a purchase of rival Asda from Walmart Inc., in what could be a multibillion-pound deal creating Britain’s biggest supermarket operator, according to people familiar with the situation.
The companies have held preliminary discussions and could announce an agreement in the coming days, said the people, who asked not to be identified because deliberations are private. No final agreement has been reached and talks could still fall apart, they said.
The talks are an effort by Sainsbury to gain scale in a brutally competitive retail market where department-store chain BHS, electronics retailer Maplin and the UK arm of Toys “R” Us have gone bust. For Walmart, the possible sale marks a further retrenchment of its international ambitions as the company focuses on competing with Amazon.com Inc. at home.
A combination of Sainsbury, the UK’s second-largest grocer, with No. 3 Asda would push the combined company past Tesco Plc. Each of the two smaller grocers has just under 16% of the UK market, according to Kantar Worldpanel, so a combined entity would have a nearly one-third share, compared with Tesco’s 28%.
Representatives for Sainsbury and Asda declined to comment. Walmart could not immediately be reached for comment.
The talks come at a time when the country’s retailers are under a growing threat from Amazon. Supermarket operators have been cutting thousands of jobs in response to a pricing squeeze exacerbated by the Brexit-induced weakness of the pound. Combining the two companies would give them greater leverage with suppliers —something Tesco has used to keep a lid on its sourcing costs.NextMAds
Asda, known for its low prices, has struggled amid the rise of discounters Lidl Ltd. and Aldi Stores Ltd., which have undercut the Walmart unit on its biggest selling point. Those companies, both based in Germany, have risen from also-rans to major competitors in the British market over the last decade.
Sainsbury chief executive officer Mike Coupe previously worked at Asda and other UK retailers. London-based Sainsbury, with a market valuation of 5.9 billion pounds ($8.1 billion), expanded into selling household goods via its £1.4 billion purchase of Argos in 2016. The Qatar Investment Authority is the company’s largest shareholder, with a 22% stake.
Walmart acquired Asda for £6.7 billion in 1999, at a time when the US company was expanding aggressively overseas. Since then it has backed out of international markets ranging from Germany to South Korea.thirdMAds
Combining Asda with Sainsbury could present challenges. The Walmart division is favoured by shoppers on tight budgets, while Sainsbury appeals to a more affluent crowd. Sainsbury has expanded aggressively into convenience stores and is focused on the south of England around London, while Asda has more large supermarkets spread across the country’s north. That geographical distribution limits store overlap.
Sainsbury may have been encouraged by the regulatory response to Tesco’s recent purchase of wholesaler Booker Group Plc, which UK authorities cleared after concluding it posed no major threat to competition. Bloomberg
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First Published:28 Apr 2018, 07:07 PM IST
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