Price Cuts Promised If Sainsbury’s and Asda Merger Is Approved

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Asda and Sainsbury’s, both considered as grocery giants in the United Kingdom, are promising to cut their prices by approximately 10 percent on everyday items if their application to merge their operations is approved.

In a joint statement that was released Today, Asda and Sainsbury’s said that they are planning to invest a total of £1 billion in the newly-formed business over the first three years. The firms promised that this would ultimately result in £1 billion in annual cost savings for the shoppers.

The two retailers are working hard to convince the top competition watchdog of the government of the United Kingdom regarding the merits of their £7.3 billion ($9.5 billion) takeover plan, which was created to build a massive shopping giant with enough heft to challenge Tesco, the industry leader.

Last month, the Competition and Markets Authority (CMA) ruled that the proposed grocery deal would not be good for shoppers and increase the prices. The regulator has the ability to stop the deal, with a final decision anticipated at the end of next month.

In the statement, Sainsbury’s made a commitment to cap its fuel profit levels, and the two firms also pledged to sell off some of its store locations.

In a written statement, Asda and Sainsbury’s stated: “The two businesses are proposing to merge so that they can lower prices for customers in an increasingly competitive market, while improving quality and service.”

Today, Sainsbury’s was considered as one of the top performers on the FTSE 100 index of London, with its shares up by approximately 2 percent in morning trading.

The shares of Tesco were also improving a bit, even though the gains were below 1 percent.

The shares in Walmart, the American retail giant and the owner Asda, were not making any big movements in premarket trading in the United States.

According to annual data from Euromonitor, a research company, Tesco dominates the grocery scene in the United Kingdom with an almost 22 percent market share while Sainsbury’s is the second largest with just over 12 percent of the market, followed by Asda with 11% percent.

In an interview with BBC earlier, Mike Coupe, the CEO of Sainsbury’s, said that the warning  of the competition watchdog about the takeover plan was “outrageous.”