An investigation into the proposed Sainsbury’s-Asda deal could take the Competition and Markets Authority (CMA) as long as up to a year, the Financial Times (£) reports. A phase-two investigation is likely and, in fact, the CMA might bypass phase one altogether it suggests, like in the case of Ladbrokes and Coral in 2016.
Ian Giles, an antitrust partner at Norton Rose Fulbright, suggested Sainsbury’s purchase of Argos and Tesco’s acquisition of Booker may have erroneously given Sainsbury’s and Asda-owner Walmart a false sense of expectation. The CMA said yesterday the planned merger was “likely to be subject to review Financial Times (£).
Analysts and MPs, meanwhile, have sounded the alert about the prospect of thousands of job losses and scores of supermarkets closing even though the two group’s official stance is that they do not expect to have to sell or shut any outlets, with both brands maintained, including Asda’s Leeds headquarters, the Financial Times (£). Price cuts of up to 10% on “everyday” items have also been promised. The City is split about the prospect of the CMA demanding store disposals. Global Data said at least 75 outlets might need to be offloaded.
Leeds MPs raised fears that the deal could lead to job losses at Asda head office but the Financial Times (£) says the government has no intention of intervening because it does not fall under the “public interest test”. Andrew Griffiths, a business minister, told the House of Commons the two companies had applied to skip the usual 40-day “phase one” of a CMA inquiry. Rebecca Long-Bailey, shadow business secretary, said that the supermarket sector was heading for a “duopoly” of Tesco and Asda/Sainsbury’s. She urged a CMA probe “as a matter of urgency” because of the potential impact on suppliers, the Financial Times (£).
The Independent says the two retailers must act fast to get “shocked” staff onside with the merger. Another article in The Independent questions whether Coupe’s claim that he will not cut shop-floor jobs or shut any stores as a result of the proposed “£12bn mega-merger” is credible and notes he was careful to make no promises on back-office jobs.
A touch of hilarity, crept into proceedings when Mike Coupe, chief executive of Sainsbury’s, was quietly filmed just before a live TV broadcast singing to himself: “We’re in the money”, reports the Financial Times (£), which The Daily Telegraph calls a “faux pas”. Coupe was not wrong, says the Financial Times (£), looking at the dramatic headway the retailer’s shares made yesterday after the deal, dubbed “project solar”, was announced – Asda was known as Mars and Sainsbury’s, Jupiter. The shares closed up 14.5% at 309p, wrong-footing hedge funds that have been shorting supermarkets over the past two years, the Financial Times (£). But Sainsbury’s did not see the funny side of ITV releasing the clip of Coupe’s warblings, The Guardian says. Coupe issued a statement in which he said he was composing himself before the interview and acknowledged it was an unfortunate choice of song. He apologised if he had offended anyone. A spokesman for Sainsbury’s said: “We all know these songs stay in your head. To attach any wider meaning to this innocent, personal moment is preposterous.” Those wanting to hear Coupe’s dulcet tones for themselves, can pop along to The Independent or The BBC which have published the video.
A columnist in The Guardian says Sainsbury’s and Asda should not sing too soon. The writer says the gamble will rebound if the CMA plays rough. Another article in The Guardian explains why Amazon is the driving force behind the merger proposal.
The Times (£) makes the point that Sainsbury’s shareholders have backed the retailer’s proposed deal, which it adds would create 2,800 Sainsbury’s, Asda and Argos stores, if approved, pushing Tesco into second place. But one top-20 shareholder told the newspaper this was not the “dream deal” he would have chosen although there was logic to it in terms of huge cost savings and putting Argos into Asda stores. Lex (£), in the Financial Times, in fact, notes, Coupe’s penchant for “anarchic UK punk bands such as The Ruts” – so it points out the “irony” that he is throwing a punch in defence of an old order – to fend off Amazon for longer.
Meanwhile, looking to Walmart, the announcement appears to signal a rethink on overseas expansion, says the Financial Times (£) in another article, and notes that it is also overhauling plans in Brazil and India, focusing on the fastest-growing international operations and vying to beef up its home base in the face of rival from ecommerce giant Amazon. Walmart will nonetheless emerge with a 42% stake in a combined Sainsbury’s/Asda.
The Financial Times (£) says there is no question that in the proposed merger, Amazon is the bogie in the wings. Amazon, although small in UK food now, is expanding and its mere presence creates acute price pressure on the market, as it has already in the UK. The newspaper’s Lombard (£), which dubs the merged entity “Sainsda”, could become fitter for purpose than Amazon across the whole of the UK. The column throws into the mix that analysts at Berenberg noted that if Amazon really wanted to compete in the UK it could buy Morrisons, although that would now only buy it third place in the UK.
Sky News asks in a video whether Morrisons could win from the Sainsbury’s/Asda deal in an interview with Dave McCarthy, head of consumer retail Europe at HSBC. Indeed, The Daily Mail says a new wave of consolidation could sweep the industry. It says speculation is mounting that Amazon could be prepared to bid for a UK supermarket. The newspaper also points out the tie-up is Coupe’s brainchild and notes there had been two years of secret talks on creating a group with sales of £51bn. The newspaper also carries a mini profile of Sainsbury’s chairman David Tyler who is leaving. It says the “mega-merger” would be a crowning achievement for him. The deal is understood to have the Sainsbury family’s backing as well as Sainsbury’s biggest shareholder, Qatar’s sovereign wealth fund.
Walmart warned it would take a hit to its profits by absorbing a $2bn loss from the deal with Sainsbury’s, reports The Times (£). In a separate article, The Times (£) says the merger should results in £500m of synergies, most of which will come from “streamlining” the supplier base. Further operational efficiencies will come from siting Argos stores in Asdas. Steve Parfett, chairman of AG Parfett, expected the deal to go through. He no longer had faith the CMA even “understood the retail grocery market properly”.
A business commentary in The Times (£), headlined Inconvenient truth of Co-op’s experience, recalls how when the Co-op bought eight Mylocal convenience stores out of administration in 2016, the CMA’s “isochrones” experts sported that the deal involved the Co-op bulking up in Widnes with an extra store on top of its existing three, which resulted in a seven-month inquiry and a deal that would have been blocked if the Co-op had not agreed to sell two of its existing three. So what happens if you re-run that sort of logic across the 2,800-strong Sainsbury’s/Asda portfolio, it asks. “Mike Coupe’s singalong confidence could be a bit misplaced,” the writer says. The writer also puts to rights the claims that Walmart is retreating from the UK. “Yes, it would be Sainsbury’s management running the show. But, contrary to some of the stuff being put about yesterday, the deal hardly adds up to the US retail gorilla retreating from the UK,” it points out.
A commentator in The Daily Telegraph says its suppliers, not customers who should fear the deal. Another article in The Daily Telegraph notes the announcement came alongside Sainsbury’s full-year results, which revealed a 19pc drop in pre-tax profits to £409m, despite an 8pc rise in revenues to £28.5bn. In yet another article The Daily Telegraph asks What the Sainsbury’s/Asda deal means for shoppers and, in another, The Daily Telegraph poses the question: What brand of supermarket snob are you? A profile of Coupe also appears in The Daily Telegraph, describing him as “the man who is about to become the king of UK retail”. Other articles in The Daily Telegraph on the deal looks at what it means for individuals and Who will be the winners and losers if the big four soon become three?
Elsewhere, The Daily Telegraph reveals that collapsed booze enterprise Conviviality spurned an 11th-hour rescue deal from activist investor Crystal Amber. The offer would have secured the final £18m needed to save it.
Holland & Barrett, meanwhile, reported its ninth consecutive year of like-for-like sales growth, The Daily Telegraph. It posted revenue growth of 7.1% in the year to September 30 to £656m. Like-for-like sales climbed 4.5% and online sales 23.6%. Pre-tax profit, however, fell from £115m to £72m because of exceptional costs relating to a subsidiary and higher finance expenses.
Ashers bakery, which has branches in Northern Ireland, is taking a claim to the Supreme Court today in a fresh attempt to overturn a £500 award made against it for refusing to bake a cake promoting same-sex marriage, The Guardian.
Six of Spain’s cava producers are breaking away from the cava name which is protected under Spain’s denominación de origen (DO) system, saying the overproduction of cheap fizz has damaged their product’s image. The group, which calls itself Corpinnat, announced earlier this month that it intends to register itself and its products under that brand name, and could end up abandoning its DO status, reports The Guardian.
Scotland has nearly double the number of people who die from alcohol related illnesses than the rest of the UK each year, says Sky News on the day that the nation becomes the first country to introduce minimum unit alcohol pricing to cut deaths.