Sainsbury’s and Morrisons Merger Talks Explored, Reports Say
Sainsbury’s and Morrisons held exploratory merger talks this year, according to reports cited by The Guardian. The deal could have combined the retailers’…
Sainsburys Morrisons merger talks this year explored a multibillion-pound deal that would have created a UK supermarket group with a 23.6% market share, according to reports cited by The Guardian. The companies are no longer in active discussions, but the possible tie-up would have reshaped competition in Britain’s grocery sector.
The combined retailer would still have trailed Tesco, which holds 27.8% of the market, according to analysts at Worldpanel by Numerator. The prospect also raises questions about competition rules and the future of Morrisons under its private-equity owner.
The negotiations were exploratory. The Financial Times and Sky reported that the two grocers held talks this year, while The Guardian said they were believed to have ended. Sainsbury’s and Morrisons declined to comment.
Competition review would be a major hurdle
Any deal would almost certainly have faced scrutiny from the Competition and Markets Authority, the UK competition regulator. The CMA could have required Sainsbury’s to sell some stores before approving a merger, according to The Guardian.
There is a recent precedent. In 2019, Asda and Sainsbury’s nearly combined in a £7bn deal, but the CMA blocked it, arguing that the merger would reduce competition and lead to higher prices for customers.
That concern carries particular weight in grocery retail, where millions of households have grappled with persistent food inflation in recent years. A smaller field of major competitors could affect shoppers’ choices and the pressure retailers face to keep prices competitive. The source reports no agreed transaction or current negotiations, however, so those potential effects remain tied to a deal that has not gone ahead.
The proposed combined market share would have placed the two businesses below Tesco, rather than making them the UK’s largest grocer. Sainsbury’s is currently the country’s second-biggest supermarket by market share, at 15.2%.
Morrisons’ ownership and debt shape the picture
US private-equity firm Clayton Dubilier & Rice bought Morrisons in 2021. The acquisition left the supermarket with more than £7bn in debt on its balance sheet, and the company has since struggled to grow as quickly as its rivals. Lidl overtook Morrisons in market share this year.
Sky reported that Clayton Dubilier & Rice was open to a tie-up between Morrisons and another major supermarket. Asda, majority-owned by private-equity firm TDR Capital, could also be drawn into deal talks, according to the broadcaster. No further details of possible discussions were reported.
Sainsbury’s has been focusing on its food business. In the summer, it agreed to sell Argos for £120m, a decade after buying the retail chain for more than £1bn. The company employs about 140,000 people.
The merger reports arrived as Lidl GB announced a 10% rise in annual revenue to more than £13bn on Monday. The retailer said pre-tax profit at its British arm increased by 30% to £245.5m in the year that ended in February, as shoppers sought cheaper fresh food and the company’s Deluxe range.
Sainsbury’s shares were flat on Monday afternoon, according to The Guardian. The stock had fallen by 3% so far this year, while Tesco shares had risen by 6%. Any renewed approach would still need to confront regulatory scrutiny, and neither supermarket has confirmed plans to resume talks.
Source: theguardian.com
