Retailers say they plan no store closures as they unveil deal to create UK’s biggest supermarket chain

This article is more than 2 years old

This article is more than 2 years old

Sainsbury’s has spelled out the terms of its planned merger with rival Asda and promised that shoppers would get a 10% cut in the price of popular foods as a result.

It said it would pay Walmart, the US owner of Leeds-based Asda, nearly £3bn in cash and give it a 42% stake in the combined business to complete the deal.

The companies said both brand names would be retained and there were no plans for store closures as a result of creating the group comprising 2,800 stores with sales of £51bn, overtaking Tesco to become the UK’s largest retailer, with a workforce of 330,000 people.

Quick guide UK's top three supermarkets Show Hide 1) Tesco Head office Welwyn Garden City

Chief executive Dave Lewis

Stores 6,809 worldwide/3,400 UK

Employees 460,000/310,000 UK

Market share 27.6%

Annual sales £51bn

Profit last year £1.3bn

Shopper visits a week 79m (worldwide) 2) Sainsbury’s Head office London

Chief executive Mike Coupe

Stores 1,414 grocers (+ 800 Argos)

Employees 195,000

Market share 15.8%

Annual sales £29bn

Profit last year £503m

Shopper visits a week 26m 3) Asda Head office Leeds

Chief executive Roger Burnley

Stores 642

Employees 165,000

Market share 15.6%

Annual sales £22bn (2016)

Profit last year n/a

Shopper visits a week 18m

However, the Sainsbury’s chief executive, Mike Coupe, said some stores could be sold off to other grocers if required by competition regulators.

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Rebecca Long-Bailey, the shadow business secretary, warned of the impact of the deal on suppliers and the GMB general secretary, Tim Roache, said the deal could hit jobs.

John Colley, a professor at Warwick Business School, said: “Ultimately there has to be job losses and the suppliers will have to pay through lower prices … customers will see reduced choice.”

However, responding to an urgent question about the deal in parliament, the business minister, Andrew Griffiths, appeared to support the merger, saying the two grocers were trying “to get ahead of the curve” in a competitive market.

Sainsbury’s shares soared 20% as the stock market welcomed the details of the deal on Monday morning and closed up 15% at 320p, their highest level since 2014.

The proposed merger of the UK’s second and third largest retailers is expected to trigger a major competition inquiry. Analysts predicted that if the deal was approved, it would result in at least 75 store disposals to ensure competition did not suffer. It would be the biggest shake-up in the market since Morrison bought Safeway in 2003, when dozens of stores changed hands.



Sainsbury’s said the merger would not be completed until the second half of 2019 as regulators will have to calculate the potential overlaps between the two groups’ stores and the impact on local competition.

Sainsbury's and Asda promise price cuts after agreeing deal to create UK's biggest supermarket chain - business live Read more

Coupe, who plans to lead the merged business, said the deal was 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”. He insisted the merger would be “a great deal for everyone”, with benefits for customers, staff, suppliers and shareholders.

Market share Market share

Coupe said the retail landscape had changed dramatically since the Morrisons/Safeway deal, with the rise of discounters Aldi and Lidl and online specialists led by Amazon.

“It’s never been more competitive and customers have more choices than ever, not just in the grocery sector but in other retail sectors. You can see the consequences of that playing out every day,” Coupe said.

The CMA confirmed the deal would be subject to investigation and Sainsbury’s said it had asked the watchdog to skip straight to a detailed “phase two” stage.

Number of stores Number of stores

Coupe said regulators would be mainly concerned by the impact on consumers who, he said, would benefit from lower prices and more choice in deciding how they shopped as a result of investment in technology.

He said the merger would deliver at least £500m in cost savings and other benefits, largely as a result of improved efficiency and better deals with suppliers.

John Hannett, the general secretary of the Usdaw union, said: “Both companies operate significant nationwide distribution networks employing thousands of staff. We will be seeking urgent clarification on the future for those workers.”

Staff numbers Staff numbers

Coupe admitted that some head office functions were likely to be combined over time but insisted new jobs would also be created.

Asda will continue to be run from Leeds with its own chief executive, likely to be the current boss, Roger Burnley, who only recently joined Asda from Sainsbury’s.

Annual sales Annual sales

Coupe insisted that the Sainsbury’s brand, which has prided itself on better welfare and food quality standards, would not be damaged by the association with Walmart, an international retail giant best known for its low prices.

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The deal enables Walmart, which bought Asda nearly 20 years ago, to take a step back from the UK market, where it is struggling to compete with Aldi and Lidl as well as Tesco, which controls almost a third of the grocery market.

Judith McKenna, the chief executive of Walmart International, said: “We believe this combination will create a dynamic new retail player better positioned for even more success in a fast-changing and competitive UK market.”

She said Walmart was interested in expanding the Sainsbury’s-owned Argos chain internationally and could help the combined business by introducing new technology and better deals on non-food goods.

The biggest shareholder in Sainsbury’s , the Qatar Investment Authority, which holds a 22% stake, announced its intention to support the merger.