asda sainsburys £10 billion merger triggers supermarket price war | City & Business | Finance


The deal, to be unveiled tomorrow, will see Sainsbury’s retain its listing on the London Stock Exchange. 

It is believed that Asda’s American parent Walmart will take a stake in the combined group. 

Sources say that merging Sainsbury’s and Asda will save hundreds of millions of pounds a year in costs, money that will be used to fund price cuts sources say. 

They add that the merger, driven by ­Sainsbury’s chief executive Mike Coupe, would leave the combined firm better placed to weather the price war between Britain’s big supermarkets and German discount chains Aldi and Lidl, which has been exacerbated by the harsh retail environment. 

The merger could lead to job losses at Sainsbury’s and Asda, which between them employ more than 250,000 full and part-time employees. 

Shop workers’ union USDAW is seeking urgent talks with both. 

Shore Capital’s Clive Black said: “The backdrop is that the acquisition of Booker by Tesco has cleared the way for further consolidation.”

Independent retail analyst Nick Bubb said that the deal would create a major rival to Tesco, which has nearly double the market share of both. 

“Geographically, it is not a bad fit, with Sainsbury’s in the South and Asda in the North and they will have umpteen local stores.” 

Earlier this month Coupe warned that the High Street crisis would deepen, as firms struggle with the squeeze on consumer finances, high rents and business rates. 

Retailers have also had to cope with the rise of online shopping bringing increased competition and altering customer buying habits. 

Firms that have used or announced that they will use Company Voluntary Arrangements, an insolvency procedure, to close unprofitable stores and slash rents on others in a bid to stay afloat include Byron Burger, Jamie’s Italian and Prezzo, fashion retailers New Look and Select, DIY chain Tops Tiles, and Poundworld. 

Hundreds of shops and restaurants have been marked for closure, with the loss of thousands of jobs by firms that are still trading. 

Companies that have gone bust include Toys R Us, electronics retailer Maplin and bedmaker and retailer Warren Evans. Retailers and casual dining chains are struggling to cope with the slowdown in the economy and consumer spending. 

Aside from the blockbuster merger with Asda, Sainsbury’s will also this week report flat statutory pre-tax profits of £501.2million for its 2017/18 financial year. 

However revenues are tipped to rise 7.9 per cent to £28.3billion. 

The full-year dividend is expected to be trimmed from 10.2p per share to 10p a share, which means investors will share payouts worth about £140million.


Source link