Asda and Sainsbury’s Could be Forced to Sell 245 Stores Once £15bn Merger is Completed

Photo by Elliott Brown from Flickr

According to new research, Asda and Sainsbury’s will be forced to sell a minimum of 73 supermarkets and could be forced to dispose of as much as 245 of their stores across the United Kingdom once their proposed merger successfully goes ahead.

The supermarkets revealed that they were having negotiations regarding a potential £15bn tie-up at the end of last month, and at the time, Mike Coupe, the boss of Sainsbury’s, said that the deal would not result in any store closures or job losses.

However, the said transaction is enduring scrutiny from the Competition and Markets Authority (CMA), which could require the combined group to sell some of their stores in areas where the competition will be at risk.

According to David Haywood, the founder of Maximise UK, a consultancy firm that identifies the profitable new locations for retailers, the number of shops that are at risk is at least 6 percent, or 73, of the combined store portfolio of the companies.

Haywood said in a BBC interview: “There hasn’t been a retail deal like this in more than a decade. The real focus will be on how Sainsbury’s and Asda’s main supermarkets operate at a local level and how they overlap. The CMA will be concerned about whether the deal reduces the number of competing brands within a 10 or 15 minute drive time.”

The 73 store sales that is estimated is based on a scenario in which the CMA includes Lidl and Aldi as some of the competitors of Asda and Sainsbury’s.

However, Maximise said that if ever the CMA takes a more hardline position and excludes the discounters from the regulator’s calculations, Asda and Sainsbury’s could be forced to dispose a maximum of 245 stores.

Coupe has vowed that any disposals that the combined group will be required to make will be sold as trading entities. However, Haywood said that this urges a greater question as to which firm will take on the stores.

Haywood said: “For me, this is the real issue regarding these overlapping catchment areas.”

He added:“Considering that 66 percent of the stores caught in the overlap analysis have selling areas over 20,000 sq ft, the key issue is who can actually acquire store locations of this size. They’re typically too big for an Aldi or a Lidl.”