Sainsbury’s has assured its customers that its planned merger with Asda would mean a 10% cut in the price of popular foods.
Following the announcement that terms had been agreed been the two retailers, Sainsbury’s Group Chief Executive, Mike Coupe, has been keen to press the benefits of the merger for customers, staff, suppliers and shareholders. However, he said some stores could be sold off to other grocers if it was required by the competition regulators. Regulators will most likely focus on the impact this merger will have on the consumer but Mike Coupe said that consumers will benefit from lower prices and greater choice with respect to deciding how they shopped as a result of increased investment in technology.
It is expected that the merger will trigger a major competition inquiry. Analysts have predicted that if the deal was to be approved, it would result in store disposals to ensure that competition did not suffer. Sainsbury’s have said that the merger would not be completed until late 2019 as the regulators will need time to consider the overlaps between the stores and the impact the merger would have on competition.
The companies have confirmed that both names would be retained and that they do not anticipate any store closures as a result of the merger. The merger would see the creation of a new group comprising of 2,800 stores and sales of £51 billion, overtaking market leader Tesco to become the UK’s largest retailer.
The rise of discount retailers such as Aldi and Lidl has made the grocery sector highly competitive and Walmart has struggled in the UK market. Walmart is better known for its low prices whereas Sainsbury’s has prided itself on better welfare and food quality standards.
Both companies have head office functions which would most likely be combined if the merger went ahead. Although Mike Coupe has insisted that this will generate new jobs, likely job losses together with suppliers being paid lower prices for goods, could ultimately result in customers being offered reduced choice on supermarket shelves.
Whether it will end up being a better deal for consumers or a better deal for Asda and Sainsbury’s shareholders will of course remain to be seen.
For advice on company mergers please call 0845 287 1939 or email Farleys’ corporate team.