Walmart’s deal to sell Asda to a rival is dead

A deal that would create the largest supermarket chain in the U.K. has been blocked by Britain’s competition watchdog.

The UK Competition and Markets Authority blocked the planned merger between J Sainsbury and Walmart’s wholly-owned Asda unit, saying it would lead to higher prices in stores and online and at many petrol stations along with lower quality goods. It is the first time that the CMA has delivered an outright veto on a deal since the agency was created in 2014, according to The Telegraph.

"It's our responsibility to protect the millions of people who shop at Sainsbury's and Asda every week," said Stuart McIntosh, who led the CMA investigation. "We have concluded that there is no effective way of addressing our concerns, other than to block the merger."

Sainsbury's and Asda responded by saying they have "mutually agreed to terminate the transaction.” Sainsbury's said the ruling ignored the "dynamic and highly competitive" nature of the U.K. market.

“The specific reason for wanting to merge was to lower prices for customers," stated CEO Mike Coupe.

Judith McKenna, CEO of Walmart International, said the company was disappointed with the decision.

“The U.K. remains one of the most competitive retail markets in the world and Asda’s seven consecutive quarters of year-on-year growth show it is a strong business with a clear strategy and focused leadership,” McKenna said. “It was against that backdrop that we decided to explore the proposed merger with Sainsbury’s – an opportunity which would have further strengthened the Asda business and delivered real benefits for U.K. customers.”

Looking ahead, McKenna said that while Walmart was disappointed with the CMS’s conclusions, the chain’s focus now is continuing “to position Asda as a strong U.K. retailer delivering for customers. Walmart has the resources it needs to achieve that.”

The deal would have created Britain’s largest supermarket group — one that would have overtaken current market leader Tesco — and one of its leading general merchandise and clothing retail companies, with more than 2,800 locations. The combined company would have been led by Sainsbury’s CEO Michael Coupe with a distinctive dual brand strategy.

The merger would have also given Walmart a way to downsize its presence in the extremely competitive U.K. market, one of the weaker performers in its global portfolio. Although the discount giant would have had a minority stake in the combined company, it would not have been involved in day to day operations.

According to various reports, Walmart’s next move could include a sale to private equity.
This ad will auto-close in 10 seconds