Sainsbury's in merger talks with Walmart UK unit

Sainsbury's in merger talks with Walmart UK unit

Before the deal can be given a green light, economists at the Competition and Markets Authority (CMA) are expected to spend months poring over a map of the combined group's store network.

However, the entrance of two low-price players into the United Kingdom scene - Lidl and Aldi - ate into Asda's market share.

The alliance will create a supermarket goliath with nearly £50bn of annual sales, leapfrogging Tesco as Britain's biggest grocery chain.

Sainsbury's said a further statement on the proposed merger would be made on Monday.

Sainsbury's has a 13.8 per cent grocery market share, Asda has 12.9 per cent.

The world's largest retailer is expected to announce Monday that Asda will combine with British retailer J Sainsbury Plc, mixing the U.K.'s second-biggest supermarket chain with No. 3 Asda, Bloomberg News reported Saturday. It will automatically trigger a competition probe, which history suggests could force store sell-offs in a tough retail climate where there are likely to be fewer buyers than during more buoyant economic times when there was a space race among the big supermarket chains.

The source, who declined to be identified because of the sensitivity of the matter, did not comment on whether the deal would dilute QIA's stake in Sainsbury's or the size of its potential stake in the combined group.

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Joanne McGuinness, national officer with the Usdaw shopworkers union, said: "We will be seeking urgent meetings with the businesses to get more detail on what a possible merger will involve. Part of the merger it to make sure they are protected from that, and also from the growing rise of the discounters".

The deal would be the largest in the United Kingdom supermarket sector since Morrisons acquired the Safeway business in 2004.

One option is Sainsbury's absorbing Asda stores, while Walmart take a large stake in the combined group. In 2016 Sainsbury's purchased general merchandise retailer Argos for 1.1 billion pounds.

However, other analysts have warned that a merger - if approved by the Competition and Markets Authority - could result in the shuttering of a large number of stores and redundancies on both sides.

In recent years Walmart has shifted its traditional approach from building overseas businesses itself to partnering with local players, for example in China.

In an interview with the BBC, Richard Lim, from economics research consultancy Retail Economics, said the merger would be a "game changer in the United Kingdom grocery market of epic proportions".

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