Veteran retail analyst Clive Black at Shore Capital said the shock findings by the CMA have delivered the Sainsbury's/Asda merger a "mortal blow".
"In provisional findings that potentially create retail history, the CMA looks minded to reject the proposed merger of Sainsbury's and Asda," he said.
"Whilst we need to see if Sainsbury's and Asda can argue and legally challenge the CMA’s findings, the deal looks to have suffered a mortal blow.
"For Sainsbury’s we see this as a major blow and one that removes the merger premium and so we downgrade to 'sell', noting its laggard status in British supermarketing.
"For Walmart this is a headache that requires plan B, although we sense that there will be more smiles in Leeds than Holborn."
Catherine Shuttleworth, CEO at Leeds-based marketing agency Savvy, said the CMA's conclusion was very surprising as it doesn't fit with precedent and fails to take account of the changing shape of the grocery market, in particular the growing influence of discounters as mass market businesses.
"The thought that a merged Sainsbury’s/Asda could push up prices is ludicrous in what would remain one of the most competitive grocery markets in the world," she said.
"Both Asda and Sainbury's must now press the CMA to understand how they have come to this frankly bizarre position. It’s likely that they will have to go to judicial review - a lot of time, detailed effort and money on both sides has been invested and it’s a big deal in every sense of the word.
"I believe that Asda remain very committed to this deal and will want some answers from the CMA to understand their calculations and their focus in the short term will be singly on that."
When asked about Asda's future if the deal doesn't go ahead and whether private equity will be brought in, she said: "Asda can stand alone definitely.
"I can’t see why Walmart would seek private equity as funding isn’t the problem. Walmart is one of the most cash rich businesses in the world after all."
Analyst James Anstead at Barclays said: "If the proposed merger ultimately fails then it will be interesting to see whether Asda remains as a Walmart subsidiary or whether its parent company pursues alternative approaches.
"There have been recent press reports suggesting that private equity might have interest in Asda if the proposed merger failed to complete."