Asda in merger talks to create grocery giant

Sainsbury’s has confirmed it is in merger talks with Asda that would create one of the largest retailers in the UK.

In a statement Sainsbury’s said “it & Walmart Inc are in advanced discussions regarding a combination of the Sainsbury’s & Asda businesses.”

A further announcement will be made on Monday.

Sainsbury’s and Asda are the second and third-largest supermarkets by market share, so a deal would face close scrutiny by competition authorities.

The latest figures by analysts Kantar show Sainsbury’s with 15.8% and Asda at 15.6%. Tesco remains the clear market leader with 27.6%.

The Leeds-headquartered supermarket, which has been owned by American giant Wal-Mart since 1999, has had a tough few years. It has struggled to fight off competition from the discount supermarkets, led by Aldi and Lidl, which has led the whole sector to squeeze margins.

Asda endured 10 successive quarters of falling like-for-sales, up until the end of 2016. Although 2017 ended this trend, the impact of those huge quarterly falls means that like-for-like sales remain lower than at the start of this decade.

“The merger of Sainsbury’s and Asda would be a game changer in the UK grocery market of epic proportions,” said Richard Lim, chief executive of Retail Economics.

“The potential tie-up would see the combined business take Tesco head-on. The newly formed retailer would be able to drive improved efficiency through cost-saving synergies, while the integration of Argos across a significantly larger store estate could ‘supercharge’ the non-food business.”

Asda chief executive Roger Burnley

It would be the most significant food retail merger since Morrisons bought Safeway in 2004.