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Sainsbury’s and Asda confirm £12bn merger and hint at 10% price cuts

Published:  30 April, 2018

Sainsbury’s and Asda have confirmed they are to merge creating a supermarket powerhouse with combined revenues of £51 billion, overtaking Tesco as the number one player in the sector.

This morning Sainsbury’s said the terms of the deal, which is likely to come under close scrutiny by competition authorities, would include Asda’s US owner Walmart receiving just under £3 billion in cash and a near 42% stake in the merged business, valuing the Leeds-based retailer at £7.3 billion.

There were no planned store closures as a result of the deal, said the companies, with plans to maintain both retail brands in a network of more than 2,800 Asda, Sainsbury’s and Argos stores with a total of 330,000 employees.

Sainsbury's also said customers would see benefits including price cuts of 10% on many "regularly bought" products, with executives targeting savings of £500 million, primarily as a result of improved efficiency and better deals with suppliers.

The deal was 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”, said Mike Coupe, Sainsbury’s chief executive who will lead the merged business.

It would create a business that was “more dynamic, more adaptable, more resilient and an even bigger contributor to the UK economy”, he added.

“Having worked at Asda before Sainsbury's, I understand the culture and the businesses well and believe they are the best possible fit. 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."

Martin Lane, managing editor of, said: “Sainsbury's and Asda are promising prices cuts, improved quality and extend ranges – which could be good news for consumers. The proof will be in the pudding - if the merger is to go ahead we'd have to hope they stick to their promises and don’t let prices creep up.

"What will be interesting to watch is how discount retail rivals, Aldi and Lidl react. Could this move put the breaks on the success of these discount brands and is it possible the merger may find a new sweet spot the market doesn't currently have.”

The deal, which saw shares in Sainsbury's leap by 20% in early trading while rivals Tesco and Morrisons were about 3% lower, is expected to complete in the second half of 2019.

The announcement came alongside Sainsbury’s full-year results, which revealed a 19% drop in pre-tax profits to £409 million, despite an 8% rise in revenues to £28.5 billion.

The drop was partly due to higher costs for restructuring and for integrating Argos, which it bought in 2016.