Today’s news that the UK’s second and third largest supermarkets, ASDA and Sainsbury’s, are looking to merge caught the market by surprise. ASDA is owned by Walmart and there is speculation that the US giant is looking to jettison its UK assets in the long term. If the deal goes ahead it is likely that Walmart will maintain a 43% holding in the enlarged group while receiving between £2 billion and £3 billion in cash. Interesting development!
I am not sure how the authorities can block this deal as Tesco currently has around 25% of the market (and recently bought out a leading wholesale supplier) and the combined Sainsbury/ASDA company would have just over 26% of the market. But why is Walmart doing this?
I would be very interested to hear of Walmarts long term growth plans for the UK and Europe - is this proposed merger anything to do with Brexit?
Whether investors do not believe the deal will go through or they are thoroughly underwhelmed time will tell but the share price is not exactly flying
Is the ASDA/Sainsbury merger dead in the water from a regulatory point of view or is the market simply not seeing any benefits at the moment?
The markets have little interest in what Walmart is doing in the UK even though it should strengthen the company's UK operations merging with Sainsbury.