SAINSBURY’S has confirmed it has agreed terms for a £12 billion 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 £51 billion and boast a network of 2,800 Sainsbury’s, Asda and Argos stores.
It will aim to generate £500 million 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.
The combined supermarket expects to lower prices by around 10 per cent on products customers buy regularly.
It will see Asda owner Walmart hold 42 per cent of the new business and receive £2.97 billion in cash, valuing Asda at £7.3 billion.
Sainsbury’s is valued at around £5.9 billion.
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 per cent market share, while Sainsbury’s has 15.8 per cent and Asda has 15.6 per cent. Together, they would move ahead of Tesco, with 31.4 per cent 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.’