Sainsbury's eyes tech investments ahead of Asda merger

May 01, 2018, 08:46
Sainsbury's eyes tech investments ahead of Asda merger

The blue-chip index has received a lift from Sainsbury's, whose shares have spiked 17.11 percent to 315.95p, after the blue-chip grocer announced plans to merge with Walmart's Asda, against the background of stiff competition in the United Kingdom grocery market.

Britain's second and third biggest supermarket chains Sainsbury's and Walmart-owned Asda have agreed to merge, the pair said Monday, hoping to create a £13 billion ($18 billion, 15 billion euro) retail king and leapfrog United Kingdom number one Tesco.

"Two businesses that can not find a way to grow through shopkeeping and so are combining".

"This is about buying power, operational efficiency and also about sharing technical expertise", he says.

"The recent approval of Tesco's takeover of Booker group may give some cause for confidence, though that deal was a vertical rather than a horizontal integration, with neither company competing directly in their key markets".

"The vast majority of colleagues in both businesses are employed in stores". If this deal goes through, it would be the second major transaction since he took over four years.

Shares in Sainsbury's jumped 16% in response to the merger news.

Will Sainsbury's and Asda still look the same?

Sainsbury's said the deal would help to "reduce [its] lease-adjusted leverage, benefiting from Asda's high freehold property ownership and pension-free balance sheet, protecting the interests of hundreds of thousands of Sainsbury's and Asda pension holders".

Patrick O'Brien, retail research director at GlobalData, said: "While there are no plans to close any stores at this time, regulators will be looking to see how many Asda stores are in close proximity to Sainsbury's stores". In addition, any overlap between the brands would undermine their respective propositions and result in the cannibalisation of sales. It should be noted that both companies will find it hard to grow organically at the pace of other competitors and hard to keep pace with the market share of Tesco. "As growth in the clothing sector continues to elude physical retail, the grocers must utilise the online channel to retain customer loyalty".

"The combination of Asda and Sainsbury's into a single retailing group will be great news for Asda customers, allowing us to deliver even lower prices in store and even greater choice", added Roger Burnley, Chief Executive Officer of Asda.

U.S. multinational retail company Walmart owns a 51% stake in local retailer Massmart, which owns Game, Builders, DionWired, Makro and Jumbo among others.

Walmart will be a long-term shareholder and partner and will leverage its global scale and investment to support the combined business. Asda, now owned by the US store chain Walmart, was established in Leeds in 1965.

Sainsbury's bought Argos in 2016 and already has more than 200 Argos outlets within its supermarkets, having rapidly expanded over the past year.

CEO Mike Coupe said: "We are focused on making Sainsbury's a destination of choice".

Business minister Andrew Griffiths told MPs that he and Business Secretary Greg Clark were monitoring the deal closely. Sainsbury's posted a modest 1.4% rise in underlying earnings to £589m, a late return to profitability since the grocery sector's near melt-down between 2014-15.

YOU MIGHT ALSO LIKE
  • Avengers: Infinity War Breaks Multiple Opening Weekend Records

    Avengers: Infinity War Breaks Multiple Opening Weekend Records

    Walt Disney Co.'s " Avengers: Infinity War " kicked off the summer movie season with the second-biggest domestic debut in history. The film is leading the Box Office after Baahubali 2: The Conclusion which made approx Rs 37.53 crore advance booking deals.
    Israel launched air strikes on naval targets in Gaza

    Israel launched air strikes on naval targets in Gaza

    Israeli forces have killed 42 Palestinians since Gaza residents began staging protests along the border fence on March 30 . Palestinian Prime Minister Rami Hamdallah waves upon arriving in Gaza City on 13 March, having survived bomb attack.
    AP SSC Results 2018 AP 10th Class Results Declared bseap.org

    AP SSC Results 2018 AP 10th Class Results Declared bseap.org

    The Board of Secondary Education Andhra Pradesh ( BSEAP ) will declare the Class 10 examination results today, that is, April 29. TS SSC Result Live Update at 11:00 AM: Earlier the result was supposed to be declared on April 26 but was postponed to April 27.
  • Strong wind and heavy rain warning issued for Anglia region

    Strong wind and heavy rain warning issued for Anglia region

    On higher ground there could also be a mix of snow as well as rain, but it is unlikely to settle on the ground, added West. The Met Office reports that "feel like" temperatures on Sunday will be 4C, before rising to 6C on the Monday.
    PSG coach Unai Emery leaving at end of season

    PSG coach Unai Emery leaving at end of season

    Emery was previously in charge of Spanish side Sevilla and won three consecutive Europa League titles with them. May 8, PSG could win another Cup.
    White House corps toasts press freedom; Trump a no-show

    White House corps toasts press freedom; Trump a no-show

    McShane said. "He's in his element, and it's basically a win-win for him, right?" "And he can say he was in Washington ". This time, he spoke at a sports park in Washington Township, Mich., creating an irresistible dual name situation.
  • Ramos confirms Madrid won't give guard of honour to champions Barcelona

    Ramos confirms Madrid won't give guard of honour to champions Barcelona

    Sulley Muntari's Deportivo La Coruna has been demoted from the Spanish Laliga following their 4-2 loss against Barcelona on Sunday.

    Stumbles, strikeouts and strandings as Rays crush Red Sox

    Gomez's leadoff shot in the seventh made it 7-5, and Field extended Tampa Bay's lead with a drive to left against Brian Johnson. He was staked a 1-0 lead in the first, when the Sox loaded the bases to start the game only to score one after J.D.
    Bellator 198: Fedor vs. Mir Results

    Bellator 198: Fedor vs. Mir Results

    With a flurry that Bellator can use repeatedly to promote Fedor's next bout with Chael Sonnen . Sure, Emelianenko still looked vulnerable in the bout, as he has in many of his recent outings.
  • 'American Idol': Meet your top 10!

    'American Idol': Meet your top 10!

    So that means for the next three (at least) Mondays we will watch , vote and find out who goes home all within the two-hour show. Diversity and talent were in the works as Jurnee , Michelle Sussett , and Dennis Lorenzo took the final Top 10 slots.
    Kelly calls 'BS' on report he called Trump an idiot

    Kelly calls 'BS' on report he called Trump an idiot

    Kelly also reportedly talked to Trump about some of these reports Monday and denied that he called the president an "idiot". A senior administration official who was in that meeting flatly denied to Fox News that Kelly called Trump an "idiot".
    Juror in Bill Cosby trial: 'Actor's fate was sealed by own deposition'

    Juror in Bill Cosby trial: 'Actor's fate was sealed by own deposition'

    Cosby faces up to 10 years in prison on each count, but he is likely to serve them concurrently. Cosby admitted to giving Quaaludes to women, young women, in order to have sex with them".
popular