In-depth review ordered for £15bn Asda-Sainsbury’s merger

The £15bn merger of supermarket giants Asda and Sainsbury’s “raises sufficient concerns to be referred for a more in-depth review,” the Competition and Markets Authority has this morning announced.

In August, the CMA opened its initial phase one investigation into the merger and said the companies had requested a ‘fast-track’ referral to phase two.

This morning, the CMA made the following announcement: “The CMA has now confirmed, through its Phase 1 investigation, that the deal raises sufficient concerns to be referred for a more in-depth review. The companies are two of the largest grocery retailers in the UK and their stores overlap in hundreds of local areas, where shoppers could face higher prices or a worse quality of service.

“These concerns will be considered further in the Phase 2 investigation, along with other issues raised so far with the CMA – including those relating to fuel, general merchandise (such as clothing) and increased ‘buyer power’ over suppliers.”

In April, it was announced that Sainsbury’s was looking to acquire Leeds-headquartered Asda, creating a £15bn-revenue grocery giant through the merger of two of the UK’s largest ‘Big four’ supermarkets in a bid to respond to “significant and rapid” change in the sector.

The merger will result in Walmart holding 42% of the issued share capital, receiving £2.9bn cash; valuing Leeds-headquartered Asda at £7.3bn.

The Phase 2 investigation is a more in-depth review, led by an inquiry group chosen from the CMA’s independent panel members. This will be chaired by Stuart McIntish, a member of the CMA’s specialist utility panel. He was previously an executive Board Member and Group Director at Ofcom, the communications regulator. Prior to that he held senior positions in several private sector organisations including PwC and IBM.

Other members of the panel will be Roland Green, John Thanassoulis, Richard Feasey and Claire Whyley.  The group will gather evidence – in particular through multiple customer surveys and engagement with other retailers, suppliers and industry bodies – to inform its detailed analysis.

An issues statement, setting out in detail the issues that the inquiry group expects to investigate, will be published in the coming weeks. Members of the public and other interested groups will be invited to give their views.