Sainsbury-Asda merger near collapse after antitrust ruling

LONDON • J Sainsbury plc’s attempt to create the biggest UK supermarket chain with the £7.3 billion (RM38.68 billion) purchase of WalMart Inc’s Asda Stores Ltd looks close to collapse after antitrust authorities attached harsher than expected conditions for approval. Sainsbury shares plunged the most in a decade.

In a provisional report, the Competition and Markets Authority (CMA) said the merger, even with substantial store sales, would likely mean higher prices and worse choice for shoppers.

Neither Sainsbury nor Asda are willing to cede one of their brands, a step the regulator suggested might be required, people familiar with their plans said, asking not to be identified because the information isn’t public.

For US giant WalMart, the collapse would complicate its strategy of focusing on faster-growing markets and could force it to seek other suitors for its UK chain.

The CMA report was “close to the worst possible outcome”, Sanford C Bernstein Ltd analyst Bruno Monteyne said in a note to clients.

The report drove Sainsbury down as much as 17%, the most since 2008, and weighed on shares throughout the industry. Wm Morrison Supermarkets plc, seen as a likely buyer for stores divested in the potential deal, fell as much as 5.3%.

Sainsbury CEO Mike Coupe pledged to “fight right the way through the process”, which runs until the end of April. If that fails, options include a court battle. The regulator has until April 30 to make a final decision. — Bloomberg