Sainsbury’s, England’s second-biggest grocery chain, on Saturday said it is in advanced discussions about a merger with Wal-Mart Stores Inc’s British unit, Asda Stores Ltd, as retailers adjust to swiftly changing shopping habits.
The combination would create Britain’s largest supermarket chain, with more than 30 percent of the market, putting it ahead of the current leader, Tesco PLC.
J Sainsbury PLC, the chain’s corporate name, released no other information about the potential deal and said it would make another announcement before the stock market opens today.
The move underscores the intense competition in England’s grocery market, as discounters take market share from traditional chains such as Sainsbury’s and Tesco.
Meanwhile, Walmart is building fewer big stores and focusing more on Internet businesses in a bid to compete for the online shoppers who use Amazon.com Inc.
“The merger of Sainsbury’s and Asda would be a game-changer in the UK grocery market of epic proportions,” Retail Economics CEO Richard Lim said.
The merger talks first were reported by Sky News. Sainsbury’s later released a statement confirming the negotiations.
Sainsbury’s in 2016 bought catalog retailer Argos Ltd and furniture merchant Habitat. The company is under pressure to respond after Tesco’s £3.7 billion (US$5.1 billion) purchase of Booker Group PLC, Britain’s biggest grocery wholesaler.
Sainsbury shares have dropped 2.1 percent in the past year, compared with a 30 percent gain for Tesco.
A combination of two of the UK’s biggest supermarket chains would be subject to review by the British Competition and Markets Authority. If it decides the new entity would have too much power in the market, the authority could block a deal or force the companies to sell stores.
The authority in December last year approved Tesco’s takeover of Booker, saying it would not substantially lessen competition.
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