Walmart's Asda won't be merging with fellow U.K. retailer Sainsbury's after all
Walmart-owned Asda and fellow British retailer Sainsbury’s have mutually agreed to terminate a proposed merger, following the release of the U.K. Competition and Markets Authority’s (CMA) final report on the transaction, which prohibited it from proceeding. The companies abided by the report’s findings, in spite of what Walmart called “the clear customer benefits” of such a deal.
As outlined in the report, a group of independent CMA panel members determined that the merger would lead to substantially less competition at both a national and local level for supermarket shoppers, meaning that consumers across the United Kingdom would be adversely affected, not just in the geographic areas where Sainsbury’s and Asda stores overlap.
“It’s our responsibility to protect the millions of people who shop at Sainsbury’s and Asda every week,” observed Stuart McIntosh, chair of the inquiry group. “Following our in-depth investigation, we have found this deal would lead to increased prices, reduced quality and choice of products, or a poorer shopping experience for all of their U.K. shoppers.”
According to McIntosh, the group came to the conclusion “that there is no effective way of addressing our concerns, other than to block the merger.”
Noted Judith McKenna, CEO of Walmart International: “We have been clear from the beginning of the proposed merger about two things. Firstly, that retail is rapidly changing and standing still is not an option, and secondly that we will always ensure our international markets are strong local businesses powered by Walmart.
“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.
“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.
“While we’re disappointed by the CMA’s final report and conclusions, our focus now is continuing to position Asda as a strong U.K. retailer delivering for customers. Walmart will ensure Asda has the resources it needs to achieve that.”
“Asda’s DNA is delivering low prices for hard working families and that will never change,” said Asda CEO Roger Burnley. “We were right to explore the potential merger with Sainsbury’s, which would have delivered great benefits for customers and supported the long-term, sustainable success of our business. We’re disappointed with their findings but will continue to find ways to put money back into customer’s pockets and deliver great quality and service in an ever changing and demanding market. I have always been hugely aware that the last year has been an unsettling time for all of our colleagues and am immensely grateful for their commitment and dedication during that time. Our focus is now on the most important job we all have – delivering for our customers.”
Meanwhile, BBC News quoted Sainsbury’s CEO Mike Coupe as saying that the CMA was “effectively taking £1 billion out of customers’ pockets.”
The proposed merger, which would have created one of the United Kingdom's largest retailers, was first revealed in April 2018.
Bentonville, Ark.-based Walmart Inc. operates more than 11,300 stores under 58 banners in 27 countries, as well as ecommerce websites. The mega-retailer is No. 1 on Progressive Grocer’s 2018 Super 50 list of the top grocers in the United States.
A wholly owned subsidiary of Walmart, multi-format Asda sells its products through 584 grocery stores, 18 stand-alone filling stations, 33 Asda Living stores and online, employing more than 146,000 people across the United Kingdom. Leeds-based Asda also operates George, a leading U.K. clothing retailer with both an in-store and online presence.