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Supermarkets Sainsbury’s and Asda agree £12bn mega-merger deal

PUBLISHED: 08:26 30 April 2018 | UPDATED: 11:01 30 April 2018

Shopping bags from Asda and Sainsbury's, as the two supermarket chains agreed a deal to create a new supermarket giant. Picture: Yui Mok/PA Wire

Shopping bags from Asda and Sainsbury's, as the two supermarket chains agreed a deal to create a new supermarket giant. Picture: Yui Mok/PA Wire

Sainsbury’s has confirmed it has agreed terms for a £12bn merger with Walmart-owned Asda, setting the stage for one of the most audacious deals in British retail history.

The duo – the UK’s number two and three supermarkets – said on Monday that the unified group would have combined revenues of £51bn and boast a network of 2,800 Sainsbury’s, Asda and Argos stores.

It will aim to generate £500m in cost savings but Sainsbury’s insisted there are no planned store closures as part of the merger, with both brands to operate side by side.

READ MORE: What will the Asda-Sainsbury’s merger mean for shoppers?

The combined supermarket expects to lower prices by around 10% on products customers buy regularly.

It will see Asda owner Walmart hold 42% of the new business and receive £2.97bn in cash, valuing Asda at £7.3bn. Sainsbury’s is valued at around £5.9bn.

In the East of England, Asda has stores in Norwich (Hall Road and Drayton High Road), Swaffham, King’s Lynn, Great Yarmouth, Lowestoft, Wisbech, Bury St Edmunds, Soham, Newmarket, Stowmarket, Ipswich, Harwich and Colchester.

Sainsbury’s has superstores across Norfolk and Suffolk, including Norwich, King’s Lynn, Thetford, Attleborough, Hunstanton, North Walsham, Great Yarmouth, Mildenhall, Bury St Edmunds, Ipswich and Haverhill.

Sainsbury’s chairman David Tyler said: “We believe that the combination of Sainsbury’s and Asda will create substantial value for our shareholders and will be excellent news for our customers and our colleagues.

“As one of the largest employers in the country, the combined business will become an even greater contributor to the British economy.”

If it goes ahead, the combination will create a high street titan with a bigger share of the market than Tesco.

Latest figures show that Tesco has a 27.6% market share, while Sainsbury’s has 15.8% and Asda has 15.6%. Together, they would move ahead of Tesco, with 31.4% of the market.

However, the merger would have to be approved by the Competition and Markets Authority (CMA).

Following the tie-up, the two grocers will continue to have their own chief executives, Sainsbury’s under Mike Coupe and Asda under Roger Burnley.

Mr Coupe said: “This is a transformational opportunity to create a new force in UK retail, which will be more competitive and give customers more of what they want now and in the future.

“It will create a business that is more dynamic, more adaptable, more resilient and an even bigger contributor to the UK economy.

“Having worked at Asda before Sainsbury’s, I understand the culture and the businesses well and believe they are the best possible fit.

“This creates a great deal for customers, colleagues, suppliers and shareholders and I am excited about the opportunities ahead and what we can achieve together.”

Unions have raised fears over the prospects for jobs, although Sainsbury’s said that the deal will “offer more opportunities” for over 330,000 colleagues at all levels.

Unite has called for “guarantees on jobs” and demanded sit down meetings with senior bosses at both Sainsbury’s and Asda.

Liberal Democrat leader Sir Vince Cable, the former business secretary, said the CMA “must investigate” any deal, with shadow business secretary Rebecca Long-Bailey echoing the call.

Sir Vince said the CMA should force the companies to sell off stores if the merger meant the new giant was dominant in a particular area, telling the watchdog’s new chief, Andrew Tyrie, to “get tough with monopolies”.

Ms Bailey warned that, in the absence of proper vetting, it would be “British shoppers that suffer from rising prices and British workers that may be fearing for their jobs”.

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