Sainsbury's and Asda say their planned £13bn merger will maintain the number of stores operated by the two brands and cut shoppers' costs.

The deal - likely to face close scrutiny by competition authorities - will create a grocery powerhouse overtaking Tesco as the number one player in the sector, with combined revenues of £51bn.

There are no plans to close Sainsbury's or Asda stores though executives are targeting savings of £500m, including "operational efficiencies" and by opening Argos concessions in Asda stores.

Sainsbury's chief executive Mike Coupe said however that he could not dismiss the possibility that regulators could order the disposal of some sites.

Analysts at Global Data said at least 75 would have to go.

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Sainsbury's said customers would see benefits including price cuts of 10% on many of the products that customers buy regularly.

Asda's US owner Walmart would receive just under £3bn in cash plus a 42% stake in the combined business, in a deal which values the Leeds-based chain at £7.3bn. Sainsbury's market value, before trading opened on Monday, was £5.9bn.

:: Live updates - Shares surge as Asda and Sainsbury's announce tie-up

Image: Asda's US owner Walmart would take a 42% stake in the combined business

Details of the agreement were set out in a stock market announcement two days after Sky News first revealed that the two supermarkets with the second and third biggest share of the sector were in advanced talks over a merger.

Shares in Sainsbury's leapt by as much as 20% in early trading. They closed 14.5% higher.

The group - which also owns Argos - said the merger would create a network of more than 2,800 Sainsbury's, Asda and Argos locations. It will have more than 330,000 employees.

Unions have voiced fears that the merger would threaten tens of thousands of jobs.

Finance director Kevin O'Byrne told Sky News no job losses were planned.

Combining Sainsbury's and Asda will create a supermarket business with a 31% share of the grocery sector, leapfrogging current leader Tesco, on 28%. The deal is expected to complete in the second half of 2019.

Image: The grocery powerhouse would overtake Tesco as the number one player in the sector

It comes at a time when the major players are battling to remain competitive, with households facing an income squeeze and German-owned discounters Aldi and Lidl posing a growing threat.

The announcement also revealed that Asda's operating profit for 2017 had fallen by 15% to £720m, despite a recovery in sales, as it piled investment into keeping prices down.

Meanwhile, Sainsbury's reported a 19% fall in its annual profit for the 52 weeks to 10 March to £409m as it counted the cost of a stores shake-up.

Plans for the merger will see the newly-enlarged business led by Sainsbury's chief executive Mike Coupe with Asda continuing to be run from Leeds with its own chief executive - who will join the board.

Mr 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.

Image: A deal between Sainsbury's and Asda is likely to face close scrutiny by regulators

"It will create a business that is more dynamic, more adaptable, more resilient and an even bigger contributor to the UK economy."

Asda chief executive Roger Burnley said: "The combination of Asda and Sainsbury's into a single retailing group will be great news for Asda customers, allowing us to deliver even lower prices in store and even greater choice.

"Asda will continue to be Asda, but by coming together with Sainsbury's supported by Walmart, we can further accelerate our existing strategy and make our offer even more compelling and competitive."

Could Morrisons win in Sainsbury's-Asda deal?

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "There are clear benefits from the two supermarkets joining forces, particularly when it comes to leveraging their combined buying power, which should result in both lower prices for customers and higher margins for the business.

"If the deal goes through, the prospect of Sainsbury, Asda, and Argos working together, with Walmart chipping in too, is a pretty powerful combination.

"It would also be good for consumers, who can expect lower prices as a result. Meanwhile the executives of other supermarkets no doubt have their head in their hands at the prospect of another price war."</s>Sainsbury's and Asda have agreed terms for a £12bn merger.

The union between UK's number two and three supermarkets sets the stage for one of the most audacious deals in British retail history.

The duo said today the unified group would have combined revenues of £51 billion and boast a network of 2,800 Sainsbury's, Asda and Argos stores.

It will aim to generate £500 million in cost savings but Sainsbury's insisted there are no planned store closures as part of the merger, with both brands to operate side by side.

The combined supermarket expects to lower prices by around 10% on products customers buy regularly.

It will see Asda owner Walmart hold 42% of the new business and receive £2.97 billion in cash, valuing Asda at £7.3 billion. 

Sainsbury's is valued at around £5.9 billion.

Sainsbury's chairman David Tyler said: "We believe that the combination of Sainsbury's and Asda will create substantial value for our shareholders and will be excellent news for our customers and our colleagues.

"As one of the largest employers in the country, the combined business will become an even greater contributor to the British economy."

If it goes ahead, the combination will create a high street titan with a bigger share of the market than Tesco.

Latest figures show that Tesco has a 27.6% market share, while Sainsbury's has 15.8% and Asda has 15.6%. Together, they would move ahead of Tesco, with 31.4% of the market.

However, the merger would have to be approved by the Competition and Markets Authority (CMA).

Following the tie-up, the two grocers will continue to have their own chief executives, Sainsbury's under Mike Coupe and Asda under Roger Burnley.

Mr 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.

"It will create a business that is more dynamic, more adaptable, more resilient and an even bigger contributor to the UK economy.

"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."

FSB say the merger can't 'squeeze the small businesses', FUW worried Sainsbury’s and Asda must assure small suppliers they won’t squeeze them after merger Responding to this morning’s formal announcement of the proposal to merge Sainsbury’s and Asda, Federation of Small Businesses (FSB) National Chairman Mike Cherry, said: "A merger of this size will concentrate a lot of power in the hands of one giant company, and it’s important that power isn’t misused to coerce small suppliers into accepting unfair contracts and poor payment terms. "Those at the top of Sainsbury’s and Asda should explain how they plan to merge these two supply chains fairly, and give reassurance that cost savings won’t be achieved simply by milking their small suppliers for all they’re worth. "When investigating this proposed merger, the Competition and Markets Authority should be looking for cast-iron commitments that a positive standard will be set for working with smaller suppliers.” FUW President Glyn Roberts said: "The proposed merger will raise many concerns for farmers given the huge power a new mega company could exert over the supply chain. "If the government were to allow such a merger, we would need to see a step change in regulation of the supply chain and the powers of the Groceries Code Adjudicator, otherwise there is a risk of severe abuses taking place which further undermine farmers and suppliers."

Unions have raised fears over the prospects for jobs, although Sainsbury's said that the deal will "offer more opportunities" for over 330,000 colleagues at all levels.

Unite has called for "guarantees on jobs" and demanded sit down meetings with senior bosses at both Sainsbury's and Asda.

Liberal Democrat leader Sir Vince Cable, the former business secretary, said the CMA "must investigate" any deal, with shadow business secretary Rebecca Long-Bailey echoing the call.

Sir Vince said the CMA should force the companies to sell off stores if the merger meant the new giant was dominant in a particular area, telling the watchdog's new chief, Andrew Tyrie, to "get tough with monopolies".

Ms Bailey warned that, in the absence of proper vetting, it would be "British shoppers that suffer from rising prices and British workers that may be fearing for their jobs".</s>Sainsbury's, formerly the second biggest supermarket, and Walmart-owned Asda, which held the third spot, said they plan to combine to overtake Tesco.

The deal would need approval from the competition authorities.

The supermarkets said the union, which would result in a group with £51 billion (€58 billion) of sales, would cut costs for consumers.

Britain's traditional supermarkets have been suffering amid competition from discount stores such as Lidl and Aldi as well as online giant Amazon.</s>LONDON
• Sainsbury's has agreed to buy Walmart's Asda for about £7.3 billion (S$13.3 billion) to create Britain's biggest supermarket group by market share, overtaking longstanding industry leader Tesco.

Bringing together Britain's second-and third-largest supermarket groups could generate the savings and buying power to help them better compete with fast-growing German discounters and growth at Tesco after its purchase of wholesaler Booker.

The cash and shares deal could also provide a potential exit route for Walmart, as Asda, which it bought in 1999 for £6.7 billion, has been struggling to grow over the last five years, with discounters Aldi and Lidl attracting its price-conscious customers.

Sainsbury's shares jumped as much as 21 per cent to 327.1 pence in early trading yesterday, their highest since July 2014, while shares in rivals Tesco and No. 4 Morrisons fell.

Walmart will receive £3 billion in cash and a 42 per cent stake in the combined business' equity, valuing Asda at about £7.3 billion.

Sainsbury's chief executive Mike Coupe will retain that position in the merged company, which will keep the Sainsbury's and Asda brands.

Analysts said the deal was a bet that recent changes in the retail industry - including the rise in online shopping, hard discounters and Tesco's purchase of Booker - would ease any opposition from competition regulators.

Bernstein senior analyst Bruno Monteyne said if regulators included discounters - which sell a much smaller range of products - in their assessment of major competitors for the new group, it might have to sell only about 8 per cent of stores. But if they do not include discounters, disposals might have to reach 15 per cent of stores, which could undermine the deal.

Speaking to the BBC, Mr Coupe said divestments were possible, but there were no plans to close shops and customers would be unaffected.

"Even if we have to divest stores, they will be sold as trading entities," he told BBC Radio.

Together, Sainsbury's and Asda have 2,800 stores.

The deal comes as Britain's big four grocers continue to lose share to Aldi and Lidl and are also having to deal with growing demand for Internet grocery shopping and the relentless march of Amazon.

The two companies have different cultures and appeal to different customers, with London-based Sainsbury's strong in own-brand products, and Asda, headquartered in Leeds, northern England, focused on price.

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

Qatar Investment Authority, the largest shareholder in Sainsbury's with a 22 per cent stake, said it supported the deal.

After a two-year lock-up period, Walmart is allowed to reduce its stake in the combined group to 29.9 per cent, and after four years could exit completely.

Sainsbury's reported its full-year results yesterday, showing a first rise in profit in four years.</s>Sainsbury's and Asda merger: Supermarket giants to join forces promising price cuts of 10 per cent SAINSBURY'S and Asda are teaming up.

Sainsbury's has agreed to merge with rival Asda, with both brands expected to remain separate.

The deal will overtake Tesco as the leader in the sector, making them the UK's biggest supermarket chain.

Currently there are no plans to close any Sainsburys or Asda stores, and customers will in fact see benefits from the merger.

There is expected to be price cuts of up to 10 per cent on many of the products customers regularly buy.

Mike Coupe, Sainsbury’s chief executive who will lead the tie-up, said 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".

He added the merger would "create a business that is more dynamic, more adaptable, more resilient and an even bigger contributor to the UK economy."

Coupe continued: "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."

He also explained the merger "will enable prices to be brought down, to improve ranges and to bring the power of Walmart in the form of buying of general merchandise and in the form of their systems and investments to the UK."

Walmart – who bought Asda almost 20 years ago – will remain a long-term shareholder in the new group.</s>Bord Bia plans to conduct a comprehensive risk assessment for the Irish food industry following the announcement of the merger of Sainsbury’s and Asda, which has the potential to create the UK’s biggest supermarket chain.

The £7.3 billion (€8.3 billion) entity will enjoy never-before-seen bargaining power and has already announced it expects to lower prices by about 10 per cent on popular products.

Suppliers fear this will be done at their expense with many potentially forced out of the business.

Bord Bia said its London office had been contacted throughout the day by Irish suppliers affected by the merger.

The agency said it plans to develop a comprehensive risk and opportunity analysis report on behalf of the industry.

“We believe each Irish exporter affected by today’s announcement will require bespoke advice as no two situations will be the same,” she said.

“To that end, we are offering one-to-one guidance and support to companies, whereby we can discuss their particular situation and potential exposure. Bord Bia will work with each company to mitigate any potential risk and explore all potential opportunities,” she added.

Details of the deal came after the companies – the UK’s number two and three supermarkets – confirmed on Monday that the deal would create a retail giant with a bigger share of the market than Tesco. It would have combined revenues of £51 billion (€58 billion) and boast a network of 2,800 Sainsbury’s, Asda and Argos stores, the latter being owned by Sainsbury’s.

Dublin-headquartered Greencore, the biggest supplier of sandwiches to UK supermarkets, saw its shares fall 1 per cent on foot of the announcement. The company declined to comment on the potential impact of the merger.

Sainsbury’s merger with Asda creates a “powerhouse” in Northern Ireland that will need to reassure its nearly 8,000-strong workforce that they have a key role to play in its future, union and business chiefs have warned.

The merger between Sainsbury’s, which has 13 stores in the North to Asda’s 17, and Asda would make the merged supermarket giant one of the biggest employers in Northern Ireland.

The Union of Shop, Distributive and Allied Workers (USDAW) said the merger came as a shock to staff in both Asda and Sainsbury’s. Michala Lafferty, area organiser in the North for USDAW, said while both organisations had vowed there would be no store closures or job losses as a result of the merger, it would create a period of uncertainty for workers.

“We know from experience that despite the promises things do change so our priority is to do everything we can to safeguard jobs in Northern Ireland and protect incomes,” she said.“There are questions to be answered about how Sainsbury’s and Asda will fit together and about how they will manage their extensive property estate.”

Both Asda and Sainsbury’s source between £250 million (€285 million) to £300 million (€342 million) from suppliers and producers in the North and South each year.</s>LONDON: Britain's second and third biggest supermarket chains, Sainsbury's and Walmart-owned Asda, have agreed to merge, the pair said on Monday (Apr 30), hoping to create a £13-billion (US$18-billion) retail king and leapfrog UK number one Tesco.

The blockbuster deal - which is effectively a takeover bid with Sainsbury's acquiring a 58 per cent stake in the combined group and Walmart the remainder - comes as long-established UK supermarkets battle fierce competition from German-owned discounters Aldi and Lidl and online US titan Amazon.

Britain's Competition and Markets Authority regulator warned that the deal will 'likely' be subject to a review - despite terms of the deal saying both brands would be retained and no stores shut.

The government informed parliament that Business Secretary Greg Clark had held talks with Sainsbury's, Asda and unions over preserving jobs.

Analysts said the new group could be forced to sell off some existing stores, most likely in areas where they'd be left with no rival competition.

News of the tie-up sent Sainsbury's share price surging 14.5 per cent to 309 pence by the close of trading in London.

Tesco slipped 0.9 per cent to 235.9 pence on concerns the group could lose its supermarket crown and possibly also the title of Britain's biggest retailer.

"Sainsbury's and Walmart Inc. are pleased to announce that they have agreed terms in relation to a proposed combination of Sainsbury's and Asda Group Limited, a wholly owned subsidiary of Walmart, to create an enlarged business," they said in a statement.

The transaction values Asda at £7.3 billion. Sainsbury's market capitalisation stood at £5.9 billion at the close of business on Friday.

"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," said Sainsbury's chief executive Mike Coupe.

Sainsbury's added: "The retail sector is going through significant and rapid change, as customer shopping habits continue to evolve.

"This has led to increased competition across grocery, general merchandise and clothing, as customers seek ever greater value, choice and convenience."

The combined business would have total revenues of £51 billion.

"We believe the combination offers a unique and exciting opportunity that benefits customers and colleagues," said Doug McMillon, chief executive of US retail behemoth Walmart.

"We look forward to working closely with Sainsbury's to deliver the benefits of the combination."

Sainsbury's said the new group would seek to lower prices by around 10 per cent on many popular products, and anticipates cost savings of at least £500 million.

It would meanwhile have a combined 24 per cent of the British grocery market, beating Tesco on 22 per cent, according to data published by retail consultancy Euromonitor.

Simran Jagdev, analyst at the Economist Intelligence Unit, added: "The deal points to the highly competitive UK grocery market, which has long been concentrated in the hands of the top four players - Tesco, Sainsbury, Asda, Morrisons - but is now facing an onslaught from new challengers.

"The transaction will, however, attract regulatory scrutiny, given that the merged companies will become the largest grocery retailer in the UK."

In Britain's fast-changing retail landscape, Sainsbury's previously bought catalogue retailer Argos in 2016 for £1.4 billion.

In March, Tesco completed the purchase of wholesaler Booker - Britain's biggest cash-and-carry operator - for £3.7 billion.

At the same time, Amazon has ramped up its 'Fresh' delivery service in Britain, amid speculation that it could decide to buy a UK supermarket group.

Sainsbury's was launched by a young couple, John James Sainsbury and Mary Ann Staples, when they opened a small London dairy shop on the day they married in 1869, according to the company's website.

Asda traces its roots back to the 1920s and was bought by Walmart in 1999.</s>Trolleys seen parked at a branch of Sainsbury's supermarket in London. Photo: Justin Tallis / AFP

LONDON - Sainsbury’s and Asda, the UK arm of Walmart, confirmed on Monday they had agreed a 13.3 billion pounds merger to create Britain’s biggest supermarket group by market share, surpassing current leader Tesco.

The combination will result in Walmart, the world’s biggest retailer, holding 42 percent of the combined business’ equity and receiving 2.975 billion pounds, valuing Asda at about 7.3 billion pounds.

Sainsbury’s had an equity value of 6 billion pounds at Friday’s closing prices.

The enlarged group would be able to better compete against German discounters Aldi and Lidl, both of which have been rapidly growing market share in Britain.

The deal would generate synergies of at least 500 million pounds, Sainsbury’s said, and enable prices to be lowered by about 10 percent on many products.

Joining together the UK’s second and third-biggest supermarket chains with combined revenues of 51 billion pounds will reduce costs and increase buying power but could face major regulatory hurdles.

The deal would see both the Sainsbury’s and the Asda brands maintained, combining a network of over 2,800 stores.

There are no planned Sainsbury’s or Asda store closures as a result of the combination.</s>Sainsbury's and Asda have agreed terms for a £12bn merger.

The union between UK's number two and three supermarkets sets the stage for one of the most audacious deals in British retail history.

The duo said today the unified group would have combined revenues of £51 billion and boast a network of 2,800 Sainsbury's, Asda and Argos stores.

It will aim to generate £500 million in cost savings but Sainsbury's insisted there are no planned store closures as part of the merger, with both brands to operate side by side.

The combined supermarket expects to lower prices by around 10% on products customers buy regularly.

It will see Asda owner Walmart hold 42% of the new business and receive £2.97 billion in cash, valuing Asda at £7.3 billion. 

Sainsbury's is valued at around £5.9 billion.

Sainsbury's chairman David Tyler said: "We believe that the combination of Sainsbury's and Asda will create substantial value for our shareholders and will be excellent news for our customers and our colleagues.

"As one of the largest employers in the country, the combined business will become an even greater contributor to the British economy."

If it goes ahead, the combination will create a high street titan with a bigger share of the market than Tesco.

Latest figures show that Tesco has a 27.6% market share, while Sainsbury's has 15.8% and Asda has 15.6%. Together, they would move ahead of Tesco, with 31.4% of the market.

However, the merger would have to be approved by the Competition and Markets Authority (CMA).

Following the tie-up, the two grocers will continue to have their own chief executives, Sainsbury's under Mike Coupe and Asda under Roger Burnley.

Mr 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.

"It will create a business that is more dynamic, more adaptable, more resilient and an even bigger contributor to the UK economy.

"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."

Unions have raised fears over the prospects for jobs, although Sainsbury's said that the deal will "offer more opportunities" for over 330,000 colleagues at all levels.

Unite has called for "guarantees on jobs" and demanded sit down meetings with senior bosses at both Sainsbury's and Asda.

Liberal Democrat leader Sir Vince Cable, the former business secretary, said the CMA "must investigate" any deal, with shadow business secretary Rebecca Long-Bailey echoing the call.

Sir Vince said the CMA should force the companies to sell off stores if the merger meant the new giant was dominant in a particular area, telling the watchdog's new chief, Andrew Tyrie, to "get tough with monopolies".

Ms Bailey warned that, in the absence of proper vetting, it would be "British shoppers that suffer from rising prices and British workers that may be fearing for their jobs".</s>The blockbuster deal comes as the UK retail sector faces squeezed profit margins due to fierce competition from German-owned discounters Aldi and Lidl—as well as online players like US titan Amazon.

The news sent Sainsbury's share price spiking more than 20 percent in initial deals on the London stock market, while Tesco sank almost four percent on fears the group could lose its retail crown.

"Sainsbury's and Walmart Inc. are pleased to announce that they have agreed terms in relation to a proposed combination of Sainsbury's and Asda Group Limited, a wholly owned subsidiary of Walmart, to create an enlarged business," they said in a statement after confirming advanced talks over the weekend.

The transaction values Asda at £7.3 billion. Sainsbury's stock market capitalisation stood at £5.9 billion at the close of business on Friday.

Walmart will own 42 percent of the combined business and receive £2.97 billion in cash, while Sainsbury's will hold a majority stake.

"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," said Mike Coupe, chief executive at Sainsbury's.

The deal still remains subject to approval from Britain's Competition and Markets Authority (CMA) regulator, amid concerns over the impact on consumer choice and jobs.

"The retail sector is going through significant and rapid change, as customer shopping habits continue to evolve," Sainsbury's said.

"This has led to increased competition across grocery, general merchandise and clothing, as customers seek ever greater value, choice and convenience.

"Bringing Sainsbury's and Asda together will result in a more competitive and more resilient business that will be better able to invest in price, quality, range and the technology to create more flexible ways for customers to shop."

The combined business would have total revenues of £51 billion and boast a network of 2,800 Sainsbury's, Asda and Argos stores.

No store closures are planned and both brand names will continue to operate side by side.

"We believe the combination offers a unique and exciting opportunity that benefits customers and colleagues," added Doug McMillon, Walmart's president and chief executive officer, in a separate statement.

"As a company, we've benefited from doing business in the UK for many years, and we look forward to working closely with Sainsbury's to deliver the benefits of the combination."

Sainsbury's will seek to lower prices on supermarket shelves by around 10 percent on many popular product ranges, and anticipates cost savings of at least £500 million.

In early deals in London, Sainsbury's shares soared more than 20 percent before settling at 316 pence, up 17.12 percent from Friday's closing level. Tesco was meanwhile 3.61 percent lower at 229.50 pence.

"Discount grocers made the business for the supermarkets even tougher and now these supermarkets have started to respond," noted ThinkMarkets analyst Naeem Aslam.

"With this merger, the combined entity would not only be in a better position to fight the German discounters such as Aldi and Lidl but also Amazon's recent move in the grocery space."

In Britain's fast-changing retail landscape, Sainsbury's previously bought catalogue retailer Argos in 2016 for £1.4 billion.

This year meanwhile, Tesco purchased wholesaler Booker—Britain's biggest cash-and-carry operator—for £3.7 billion in a deal that completed in March.

Booker sells goods to more than 500,000 customers, including grocers, pubs and restaurants. It also owns convenience store chains Budgens, Londis and Premier, as well as trade-facing divisions Makro and Booker Wholesale.

Explore further: UK supermarket giant Sainsbury says in merger talks with Asda
British supermarkets Asda and Sainsbury's agree terms on a £13 billion merger, which could form the largest UK supermarket company.