Thousands of jobs could be lost if CMA gets tough on Asda-Sainsbury’s merger
PUBLISHED: 17:01 30 April 2018 | UPDATED: 17:41 30 April 2018
The fate of thousands of supermarket jobs is in doubt after details of Sainsbury’s shock £12bn merger with Asda appeared.
Bosses at the grocery giants initially insisted no stores would close as a result of the deal, but later admitted regulatory authorities could force them to offload stores as part of a competition probe.
Sainsbury’s has estimated a range of stores could be sold as part of its modelling ahead of the deal.
This estimate, based on possible outcomes from the Competition and Markets Authority investigation, has been used by bosses to calculate that £500m in cost savings will be produced when the companies merge.
While an exact number of store closures was not divulged by the chains, numbers crunched by research firm GlobalData show that “at least” 75 stores where Sainsbury’s and Asda overlap are at risk.
In Norfolk and Suffolk, the retailers both have outlets in Norwich, Great Yarmouth, Bury St Edmunds, Ipswich, and King’s Lynn - though the CMA’s view is likely to depend on how close the competing stores are, and whether shoppers have alternative supermarket choices nearby.
READ MORE: Q&A: What will the Sainsbury’s-Asda merger mean for shoppers?
Patrick O’Brien, UK retail research director at GlobalData, said: “Regulators will be looking to see how many Asda stores are in close proximity to Sainsbury’s stores.
“Seventy-five Asda stores have a Sainsbury’s (excluding Locals) in the same sector. We think these 75 stores would be the absolute minimum that the CMA will want disposed of.”
Sainsbury’s insists that any stores it offloads will be done so as “trading entities”, but the future of staff at those outlets – which number anywhere from 7,500 to 10,000 – will depend on whether a buyer is found and if the shops are then kept trading.
For its part, the CMA said that the merger is “likely to be subject to review”, adding that it will assess whether the deal could reduce competition and choice for shoppers.
But Mr O’Brien added: “They (Sainsbury’s and Asda) know there are going to be closures but they do not want anyone associating them with the decision to close.
“It is very important to them to keep their hands clean because when the job cuts come, and they eventually will, they will be able to pin it on the CMA.”
Details of the deal came after the companies – the UK’s number two and three supermarkets – confirmed on Monday morning that the deal will create a retail titan with a bigger share of the market than Tesco.
READ MORE: Supermarkets Sainsbury’s and Asda agree £12bn mega-merger deal
It would have combined revenues of £51bn and boast a network of 2,800 Sainsbury’s, Asda and Argos stores.
It will see Asda owner Walmart hold 42% of the new business and receive £2.97bn in cash, valuing Asda at £7.3bn. However, Walmart will also book a two billion US dollar non-cash loss on the deal. Sainsbury’s is valued at around £5.9bn.
The combined supermarket expects to lower prices by around 10% on products customers buy regularly.
Sainsbury’s boss Mike Coupe said: “This is a transformational opportunity to create a new force in UK retail, which will be more competitive and give customers more of what they want now and in the future.
“This creates a great deal for customers, colleagues, suppliers and shareholders and I am excited about the opportunities ahead and what we can achieve together.”
Shares in Sainsbury’s rocketed as much as 20% as investors interpreted the deal as a boon for the firm, before settling at 15% higher.
Conversely, shares in Tesco fell as much as 4% and Morrisons stock was down 3% before edging back through the day.