Sainsbury’s & Asda offer to sell upto 150 stores to win merger approval

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Sainsbury's Asda
// Sainsbury’s & Asda offer to sell between 125-150 stores in order to win over CMA
// CMA had said they needed to sell 300 otherwise their proposed merger would be blocked
// Sainsbury’s & Asda accuse CMA of creating possible remedies that were “impossible to implement”

Sainsbury’s and Asda have said they were willing to sell between 125 and 150 of their stores to have their proposed merger approved by the UK’s competitions regulator.

However, their number was well short of what the CMA has said it is looking for before it could greenlight their £12 billion merger.

In documents published by the CMA on Friday, the two grocery giants said the watchdog’s provisional findings on their proposed merger amounted to “prohibition in all but name”.

The supermarkets had pledged £1 billion in price cuts just days earlier as part of their official response to the provisional findings, but its response to the CMA’s notice of possible remedies was published in full on Friday.

In it, Sainsbury’s and Asda said the CMA’s proposed remedies, mainly the store divestment proposals, “appears to have been designed to be impossible to implement”.

In its provisional findings, the CMA had found 629 areas where the merger could lead to a substantial lessening of competition, 290 areas where online competition could be reduced, and 65 local overlaps in smaller convenience stores.

It said the supermarkets needed to offload 300 stores in order for the merger to be green lit, while highlighting it would be “difficult for the companies to address the concerns it had identified”.

Sainsbury’s and Asda said the CMA’s analysis was “fundamentally flawed” but offered to sell 125-150 supermarkets, a number of convenience stores and some petrol stations.

They added that their proposal was based on “a more credible finding” around areas of substantial lessening of competition and that divestment of an online grocery operation was “not necessary or proportionate”.

The grocers also said that shoppers would be deprived of lower prices should the merger be blocked.

They added that they “categorically reject the CMA’s view that coming together will lead to a worse outcome for customers”.

“We have asked the CMA to correct significant errors in its provisional findings,” Sainsbury’s chief executive Mike Coupe and Asda chief executive Roger Burnley said.

“Its analysis fundamentally misunderstands how people shop today as well as ignores the intensity of competition and the dynamism of the UK grocery market, which evolves on an almost weekly basis.”

They added: “We regret the uncertainty this process causes for our colleagues and want to reassure them that no stores would close because of this merger, with any divested stores run by a credible third party.”

The CMA’s final report and decision is expected by April 30.

If rejected, Sainsbury’s and Asda’s would be able to challenge the ruling through the Competition Appeal Tribunal.

If approved, the merger would create a new company with annual revenue of about $66 billion, more than 2500 stores and a grocery market share of around 31 per cent – effectively toppling Tesco from its longstanding position as the market leader in the UK.

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