Price cut pledge for shoppers as Sainsbury's and Asda plan to come together under Walmart banner

The bosses of Asda and Sainsbury's today confirmed their intention to merge, promising to cut costs for shoppers by as much as 10 per cent as part of a new business which will be a wholly-owned subsidiary of Walmart.

Concerns have grown over consumer choice and the possible threat to jobs if the merger were to go ahead
Concerns have grown over consumer choice and the possible threat to jobs if the merger were to go ahead

Bosses said the newly-created business between the nation’s second and third largest supermarkets “will create a dynamic new player in UK retail with an outstanding breadth of products, delivered through multiple channels”.

A statement issued this morning said Asda would continue to be run from Leeds. However the combined business will be chaired by the Sainsbury’s Chairman and led by the Sainsbury’s CEO and CFO. No information on the potential of any cuts to jobs was released.

Sign up to our Business newsletter

The combination will result in Walmart holding 42 per cent of the issued share capital of the combined business for £2.975 billion of cash, valuing Asda at approximately £7.3 billion.

The deal will almost certainly be referred to the competition watchdog and be subject to much scrutiny.

Among the highlights so far released by both firms are:

- The combined business will create one of the UK’s leading grocery, general merchandise and clothing retail groups, with combined revenues of £51 billion.

- The brands of both firms will be retained and no store closures are planned.

- Combine a complementary network of more than 2,800 Sainsbury’s, Asda and Argos stores and several of the UK’s most visited retail websites, to create greater choice for customers through more store formats and channels, with a combined 47 million customer transactions per week

- A pledge to lower prices by c.10 per cent on many of the products customers buy regularly.

- By combing their strategies the two firms expect to post investments in price, across the enlarged group of at least £500 million

- Walmart will be a long-term shareholder and partner and will leverage its global scale and investment to support the Combined Business. Upon completion, two Walmart representatives will join the Board of the Combined Business as non-executive directors.

Undated handout photo issued by Asda of Roger Burnley

Asda will continue to be run from Leeds with its own CEO, who will join the Group Operating Board of the Combined Business.

Latest figures show that Tesco has a 27.6% market share, while Sainsbury’s has 15.8% and Asda has 15.6%. Together, they would move ahead of Tesco, with 31.4% of the market.

David Tyler, Chairman of Sainsbury’s, 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. The proposal will bring together two of the most experienced and talented management teams in retail at a time when the industry is undergoing rapid change. We welcome Walmart as a significant shareholder and look forward to working closely with them.”

Mike Coupe, Chief Executive Officer of Sainsbury’s, 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.”

Sainsbury's in Blackpool

Judith McKenna, President and Chief Executive Officer of Walmart International, said: “This proposed merger represents a unique and bold opportunity, consistent with our strategy of looking for new ways to drive international growth. Asda became part of Walmart nearly 20 years ago, and it is a great business and an important part of our portfolio, acting as a source of best practices, new ideas and talent for Walmart businesses around the world. 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. It will unlock value for both customers and shareholders, but, at the same time, it’s the colleagues at Asda who make the difference, and this merger will provide them with broader opportunities within the retail group. We are very much looking forward to working closely with Sainsbury’s to deliver the benefits of the combined business.”

Roger Burnley, Chief Executive Officer of Asda, said: “The combination of Asda and Sainsbury’s into a single retailing group will be great news for Asda customers, allowing us to deliver even lower prices in store and even greater choice. Asda will continue to be Asda, but by coming together with Sainsbury’s, supported by Walmart, we can further accelerate our existing strategy and make our offer even more compelling and competitive.

“From my six years with Asda and ten years with Sainsbuy’s, I know first hand that both organisations are fortunate to employ some of the most talented and customer-focused colleagues in this market and I am excited by the opportunity of the two coming together.”

Undated handout photo issued by Asda of Roger Burnley
Sainsbury's in Blackpool