Sainsbury’s also insisted that the pension schemes of the two businesses would be protected with Walmart maintaining Asda’s defined benefit scheme. But it still faces many hurdles. Shares in Sainsbury’s jumped 16% in response to the merger news. Here’s a merger we’d also like to see made a reality…
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The cash and stock deal combines the No. 2 and No. 3 supermarket chains in Britain, to create the country’s largest group by market share, overtaking long-standing leader Tesco.
The stance of the Competition and Markets Authority in terms of the effect this deal will have on local retailers will be critical to the viability of this deal.
Nonetheless, Coupe added Sainsbury’s continues to find ways to simplify its business and reduce costs, and has exceeded its original three-year GBP500m cost saving programme and delivered a total of GBP540m in savings, plus a further GBP500m of cost savings at least over the next three years to 2020/21.
“It is hard to see how the Sainsbury’s brand and operations will align with the everyday low price model of Walmart International”, James Butcher, managing director for Solutions for Retail Brands, said in a statement emailed to our sister publication Food Dive.
Supermarket operators in the United Kingdom have been facing huge challenges thanks to a pricing squeeze which has worsened due to the growing weakness of the pound caused by Brexit.
“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”.
Instead, he said cost savings of at least £500m would allow the new group, which will account for almost £1 in every three £3 spent on groceries, to reduce prices by a tenth on many “everyday items”.
Coupe, who used to work for Asda, Sainsbury’s Chairman David Tyler and finance chief Kevin O’Byrne will all retain their positions in the merged company.
The planned combination of J Sainsbury plc and USA -owned Asda Group Limited was announced by the two companies in an official statement on Monday.
Sainsbury’s shares closed on Friday at 269 pence, giving the company an equity value of £6bn.
Given how big the two companies are, regulators must assess if the merger would create disruptions in the market. He says prices could be lowered by as much as 10 per cent.
£51bn – This figure represents the combined revenue of Sainsbury’s, Asda and Sainsbury’s Argos range of retail outlets based on the 2017 fiscal year.
Sainsbury’s expects the deal to generate £500mln in synergies by opening Argos in Asda stores and through operational efficiencies.
The Qatar Investment Authority, now the largest shareholder in Sainsbury’s with a 22 per cent stake, said it supported the deal.
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Advertising group WPP also stood out on Monday as its shares climbed by 8.6 percent after the company reported better than expected first-quarter net sales and reiterated its full-year guidance in the first set of results to be published without founder Martin Sorrell.
