Sainsbury’s and Asda open £10bn merger discussions

Sainsbury’s and Asda are in talks over a £10bn merger that would create a retailer more powerful than the current market leader, Tesco.

A deal between the UK’s second and third largest supermarket chains would create a new group with huge share of the market in food, clothing, household goods and toy retailing.

Sainsbury’s already owns Argos while Asda’s George clothing brand vies with Marks & Spencer and Primark to sell the most clothing in volume terms. The enlarged supermarket group would have nearly 3,000 stores and annual sales of more than £50bn.

Any proposed deal will be scrutinised by the competition watchdog over concerns it would strengthen the grip the four big supermarket chains – Tesco, Sainsbury’s, Asda and Morrisons – have on the UK grocery market.

A suggestions from analysts is that the merger could lead to thousands of job losses as the two chains cut out duplication. The big supermarkets have recently cut thousands of back-office and shopfloor jobs in a drive to cut costs.

Competition has been ramped up by the fast-growing German discounters Aldi and Lidl which has stolen shoppers from the big four in recent years, leading to their drop in sales.

Sainsbury’s confirmed it was in talks with the US retail giant Walmart, which has owned Asda since 1999.

“Sainsbury’s confirms that it and Walmart Inc are in advanced discussions regarding a combination of the Sainsbury’s and Asda businesses,” the company said in a statement put out Saturday afternoon.

Sainsbury’s has promised to provide more details to the stock exchange on Monday morning.

Sainsbury’s has a network of more than 1,400 supermarkets and convenience stores while Asda has around 600 stores. Sainsbury’s also has 800 Argos outlets.

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