In blow to Walmart, antitrust objections threaten Asda’s takeover by Sainsbury’s
The proposed acquisition of Walmart-owned Asda by Sainsbury’s — a deal that would create the U.K.’s biggest grocery chain — has received a major blow.
The Competition and Markets Authority, the U.K.’s competition watchdog, on Wednesday warned that the deal could increase prices and reduce quality for customers of both brands. In a preliminary report, the CMA said it would be "difficult for the companies to address the concerns it has identified" and that a significant number of stores would probably need to be sold before it gains approval.
The Asda-Sainsbury’s deal, which valued Asda at about $10 billion, was announced in April 2018. Under the terms of the agreement, Walmart would hold a 42% share of the combined business, which would operate with a distinctive dual brand strategy.
In a joint statement, Asda and Sainsbury's expressed concerns about the CMA's findings, saying that the merger could actually allow costs to consumers to be lowered.
“The CMA has moved the goalposts and its analysis is inconsistent with comparable cases,” the two retailers stated. “Combining Sainsbury’s and Asda would create significant cost savings, which would allow us to lower prices. Despite the savings being independently reviewed by two separate industry specialists, the CMA has chosen to discount them as benefits.”
The CMA report was “close to the worst possible outcome,” Sanford C. Bernstein Ltd. analyst Bruno Monteyne said in a note to clients, reported Fortune.
The Competition and Markets Authority, the U.K.’s competition watchdog, on Wednesday warned that the deal could increase prices and reduce quality for customers of both brands. In a preliminary report, the CMA said it would be "difficult for the companies to address the concerns it has identified" and that a significant number of stores would probably need to be sold before it gains approval.
The Asda-Sainsbury’s deal, which valued Asda at about $10 billion, was announced in April 2018. Under the terms of the agreement, Walmart would hold a 42% share of the combined business, which would operate with a distinctive dual brand strategy.
In a joint statement, Asda and Sainsbury's expressed concerns about the CMA's findings, saying that the merger could actually allow costs to consumers to be lowered.
“The CMA has moved the goalposts and its analysis is inconsistent with comparable cases,” the two retailers stated. “Combining Sainsbury’s and Asda would create significant cost savings, which would allow us to lower prices. Despite the savings being independently reviewed by two separate industry specialists, the CMA has chosen to discount them as benefits.”
The CMA report was “close to the worst possible outcome,” Sanford C. Bernstein Ltd. analyst Bruno Monteyne said in a note to clients, reported Fortune.