Asda and Sainsbury’s propose selling 150 stores to save merger
Asda and Sainsbury's have offered to sell up to 150 supermarkets and several convenience stores in a bid to save their proposed merger.
Read more: Sainsbury's and Asda double down on £1bn price cut pledge to salvage deal
The supermarkets promised they could divest between 125 and 150 supermarkets and "a number" of the convenience stores in a bid to placate the Competition and Markets Authority.
They also said they may sell off "a sufficient number" of petrol stations.
The UK’s competition watchdog left the deal looking “dead in the water” to most observers after saying it was unlikely the supermarket giants could do enough to satisfy competition concerns.
But today Sainsbury’s and Asda came out fighting in a bid to save the £12bn merger.
They argued their new proposals “represent a unique opportunity for existing operators to add additional scale or for a new operator to obtain immediate scale”.
The duo has already committed to delivering £1bn in price cuts following the tie-up in response to the Competition and Markets Authority’s (CMA’s) findings published last month.
They also attacked the CMA’s suggestion they divest up to hundreds of stores to stem the concerns of the watchdog, which found competition in 629 areas could be impacted.
That appeared to suggest the chains sell off around 300 stores.
Sainsbury’s and Asda said: “The CMA’s remedy proposal is impossible to implement. It is prohibition in all but name and deprives customers of lower prices, better quality and better service.”
They added: “The CMA’s analysis ignores both the evidence and the realities of how customers shop today. The CMA has applied a threshold for identifying local areas of concern that does not fit the facts and is far below the most conservative standards applied in previous cases.”
Two potential remedies were outlined by the CMA to prevent a loss of competition – either blocking the merger or forcing the pair to sell off stores, or even branding.
But the watchdog said it “currently considers that there is a significant risk that a divestiture will not be effective in this particular case”.
Read more: Watchdog may block Sainsbury's-Asda merger
Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, warned that while Sainsbury's is “digging its heels in”, the number of stores is unlikely to satisfy the watchdog, which will make a final decision by 30 April.
“No one can be sure what the outcome will be, but there’s a fair chance today’s proposals simply won’t be enough to convince the watchdog that the merger between Asda and Sainsbury wouldn’t create a competition problem,” she said.