Sainsbury Confirms Merger With Walmart U.K. Business
30 April 2018 - 5:10PM
Dow Jones News
By Oliver Griffin
J Sainsbury PLC (SBRY.LN) said Monday that it has agreed to
merge with Walmart Inc.'s (WMT) U.K. operating arm, Asda Group
Ltd., to create an enlarged business with combined revenue of
around GBP51 billion ($68.9 billion) in 2017.
The U.K. supermarket said that Walmart will hold 42% of the
combined business and will receive GBP2.98 billion as part of the
deal, valuing Asda at around GBP7.3 billion. When the deal is
complete, Walmart won't hold more than 29.9% of the total voting
rights for the combined business, Sainsbury said.
Walmart operates about 600 Asda stores in the U.K., the
company's biggest overseas market by revenue. It acquired Asda in
1999 for $10.8 billion--its biggest ever acquisition--as part of
Walmart's goal at the time to double its international
operations.
Sainsbury said that the deal is expected to generate Ebitda
synergies of at least GBP500 million, comprised largely of buying
benefits and operational efficiencies. The supermarket said that
there were no planned store closures as part of the merger.
After the merger, the combined Sainsbury-Asda business will
leapfrog Tesco PLC (TSCO.LN) to become the U.K.'s largest
supermarket by market share, according to the latest data from
Kantar Worldpanel. According to the market surveyor, Tesco holds a
market share of 27.6%, but the new combined business will hold a
market share of 31.9%.
Analysts at Bernstein said that a valuable merger will swing on
the businesses' ability to convince the U.K. monopoly watchdog, the
Competition and Markets Authority, to include smaller discounter
stores within its local competition rules parameters. If the CMA
sticks to its old rules, the grocers might be forced to dispose up
to 15% of stores and if the business has to give up 13% or more of
its stores, the deal will no longer add value, Bernstein said.
Write to Oliver Griffin at oliver.griffin@dowjones.com
(END) Dow Jones Newswires
April 30, 2018 02:55 ET (06:55 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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