Walmart sells British arm to rival, sparking competition concerns | Business| Economy and finance news from a German perspective | DW | 30.04.2018
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Walmart sells British arm to rival, sparking competition concerns

Britain's antitrust regulator is set to review the merger of two of the country's largest grocery chains Asda and Sainsburys. Opposition politicians warn that the $10 billion deal will create a supermarket monopoly.

US retail giant Walmart on Monday agreed to sell its British unit, Asda, to local rival Sainsbury's in a 7.3 billion GBP (€8.3 billion $10.1 billion) deal.

The cash and stock deal combines the No. 2 and No. 3 supermarket chains in Britain, to create the country's largest group by market share, overtaking long-standing leader Tesco.

The new group, which will have a combined market share of 31.4 percent, will be better placed to see off competition from German discount supermarket chains Aldi and Lidl, as well as US online retailer Amazon, Sainsbury's said.

Read more: Why don't Aldi and Lidl deliver?

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Walmart, which bought Asda in 1999 for 6.7 billion pounds, said it would focus on online sales in countries with higher growth and less intense competition.

The US retailer will receive 3 billion pounds in cash and a 42 percent stake in the combined business' equity.

Hundreds of millions in savings

Sainsbury's said the merger would generate synergies of at least 500 million pounds and enable prices to be lowered by about 10 percent on many products. The Asda brand will remain intact, it said.

Sainsbury's CEO Mike Coupe said he was "100 percent confident" that no stores would be closed because of the deal.

But Monday's deal was quickly rounded upon by British opposition politicians who said shoppers and workers would suffer from rising prices and job cuts.

"This merger risks squeezing what little competition there is in the groceries market even further and moves alarmingly close to the creation of a supermarket monopoly," said Rebecca Long-Bailey, the opposition Labour Party's shadow business secretary, in a statement.

The Unite and Usdaw unions, which both represent store and warehouse workers, said staff at the two firms were in a state of "shock" at the news.

"We are seeking urgent meetings with both retailers to establish the details of their plans and ensure that the voice of the staff is heard," said Usdaw General Secretary John Hannett.

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Doubts over antitrust approval

Britain's Competition and Markets Authority (CMA) said it was likely to review the deal, which some analysts doubted would pass without a major divestment of overlapping stores.

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British media reported, however, that Sainsbury's was confident that the deal would get approval after regulators gave their blessing to the takeover of cash and carry retailer Booker by rival Tesco.

The British government hailed the mega-merger, saying it would be beneficial for the UK economy and consumers.

"One of the things that the new merger will offer... is reduced costs for the consumer," junior business minister Andrew Griffiths told parliament on Monday.

He vowed to ensure that the deal also benefits the supermarkets' suppliers, who often complain of being squeezed on price.

Read more: AI-based Amazon Go store makes cashiers redundant

Sainsbury's shares jumped as much as 21 percent on the London Stock Exchange to 327.1 pence, their highest since July 2014 and were on course for their biggest-ever daily gain, while shares in rivals Tesco and Morrisons fell.

mm/uhe (AP, dpa, Reuters)

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