Asda to keep Yorkshire HQ but store disposals are possible

Mike Coupe of Sainsbury's, Judith McKenna of Walmart and Roger Burnley of Asda

Sainsbury’s CEO Mike Coupe refused to be drawn on where overlaps between the two firms exist, but said: “I haven’t said we won’t have to sell stores.

“The CMA (Competition and Markets Authority) may or may not ask us to sell stores, but we don’t know that.”

Sainsbury’s insisted that no stores will close as a result of the deal, but said regulatory authorities could force it to offload stores as part of a competition probe.

Analysts said the store disposals could be as few as 75 or over 100.

Research firm GlobalData show that at least 75 stores where Sainsbury’s and Asda overlap are at risk.

Patrick O’Brien, UK retail research director at GlobalData, said: “Regulators will be looking to see how many Asda stores are in close proximity to Sainsbury’s stores.

“75 Asda stores have a Sainsbury’s (excluding Locals) in the same sector. We think these 75 stores would be the absolute minimum that the CMA will want disposed of.”

Sainsbury’s insists that any stores it offloads will be sold as trading entities, but the future of staff at those outlets - which number anywhere from 7,500 to 10,000 - will depend on whether a buyer is found and if the shops stay trading.

Mr O’Brien said: “It is very important to them (Sainsbury’s and Asda) to keep their hands clean because when the job cuts come, and they eventually will, they will be able to pin it on the CMA.”

The CMA said that the merger is likely to be subject to review, adding that it will assess whether the deal could reduce competition and choice for shoppers.

Analyst Clive Black at Shore Capital said: “If the CMA forces stores to be disposed and no other organisation decides to acquire them, which is a distinct possibility, then what happens? Do stores have to close? Could the CMA try and broker more favourable deals to potential suitors?”

Analyst Bruno Monteyne at Bernstein added: “This is a bold gamble. This deal could easily unravel acrimoniously if the CMA sticks to its old rules and parameters. At 13 per cent store disposals, the deal would stop being accretive.

“We expect the process for the CMA to take one year and to be swiftly approved, if the CMA gives clearance with limited disposals.

“We think the risk of higher disposals is high and a non-negligible risk of outright rejection of the deal.”

Sainsbury’s said Asda’s head office will remain in Leeds and there are no plans for any job losses.

The two firms will operate as separate identities and will keep their own brand names.

Asda will continue to be run by CEO Roger Burnley.

Mr Burnley said: “Today’s announcement is good for Asda because it’s great for our customers.

“Asda will absolutely remain in Yorkshire. It’s a proud Yorkshire business and I’m a proud Yorkshire man so Asda, I’m delighted to say, will remain in Yorkshire with its headquarters in Yorkshire because this proposal is about a twin brand strategy with Asda and Sainsbury’s remaining very much separate brands.”

Mr Coupe added: “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.

“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.”

Shares in Sainsbury’s closed up 14.5 per cent per cent as investors welcomed the deal.