Former Asda board member: Sainsbury's merger "treats us as fools"

Roman Schwartz
May 2, 2018

Bord Bia is carrying out an "immediate action plan" on the potential impact of the planned merger between top United Kingdom supermarket chains Sainsbury's and Asda on the Irish agri-food sector.

The Sainsbury's deal will create a retail chain with 2,800 stores and combined annual sales of $70 billion, putting Sainsbury's and Walmart ahead of the lead competitor Tesco.

Mike Coupe was preparing for an ITV interview to discuss the $10 billion deal when caught on microphone singing a song from the musical "42nd Street", which is based on a movie made during the Great Depression.

Industry bodies have said the merger would make trade challenging for smaller suppliers who are already struggling to cope with increases in the minimum wage and the auto-enrollment of pensions, as well as the devaluing of the pound following the Brexit referendum.

However, the surprise decision by the CMA to unconditionally clear the Tesco/Booker deal may have encouraged Sainsbury's and Asda to believe they could get a viable transaction through.

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Sainsbury's said the combination would generate synergies of at least £500 million and enable prices to be lowered by about 10 percent on many products.

The merger, between the UK's number two and three supermarkets, was agreed upon by the two companies but awaits approval from the Competition and Markets Authority (CMA) in order to be finalised.

Overall, the British grocery market grew at its slowest rate since March previous year at two per cent due to lower grocery prices. Therefore, the merger seems like a very good opportunity for both retailers, both here in Northern Ireland and in the rest of the UK. It'll own 42 percent of the combined company, with 29.9 percent of the voting rights.

The Qatar Investment Authority, now the largest shareholder in Sainsbury's with a 22% stake, said it supported the deal. In particular it is concerning for towns, such as Flint, where we have both an Asda and a Sainsbury's right next door to each other.

Sainsbury's also reported its full-year results, showing a first rise in profit in four years and expressed confidence in meeting analysts' profit forecasts for 2018-19.

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