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Walmart joining forces with Sainsbury in the U.K.

Sainsbury Asda

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BENTONVILLE, Ark. — Walmart plans to merge its Asda unit in the United Kingdom with J. Sainsbury PLC, in a move that would unseat Tesco PLC as the country’s top retailer. Asda currently ranks No. 3 in market share, and Sainsbury is No. 2.

Under the terms of the deal, Walmart would have a 42% stake in the combined business, and would receive about £2.975 billion ($4.097) in cash, subject to customary closing adjustments. Walmart would retain the Asda defined benefit pension scheme as part of the combination, along with any ongoing defined benefit pension-related obligations.

“We believe the Combination offers a unique and exciting opportunity that benefits customers and colleagues,” Walmart president and CEO Doug McMillon said in a statement. “As a company, we’ve benefited from doing business in the UK for many years, and we look forward to working closely with Sainsbury’s to deliver the benefits of the combination.”

The deal is subject to various approvals, including from Britain’s Competition and Markets Authority. If the merger goes through, the companies say the new business will operate with a dual dual brand strategy. Asda would continue to be run from Leeds, England, by its own CEO, Roger Burnley, who would join the group operating board of the combined business.

“This is a transformational opportunity to create a new force in UK retail, which will be more competitive and give customers more of what they want now and in the future,” Sainsbury’s CEO Mike Coupe said. “It will create a business that is more dynamic, more adaptable, more resilient and an even bigger contributor to the U.K. economy. Having worked at Asda before Sainsbury’s, I understand the culture and the businesses well and believe they are the best possible fit. This creates a great deal for customers, colleagues, suppliers and shareholders and I am excited about the opportunities ahead and what we can achieve together.”

According to the companies,the key benefits of the combination include:

  • The creation of one of the U.K.’s leading grocery, general merchandise and clothing retail groups, with combined revenues of about £51 billion.
  • The potential for investment in areas that will benefit customers the most: price, quality, range and creating more flexible ways to shop, across the Sainsbury’s, Asda and Argos chains. The companies expect customers to see significant price reductions.
  • The establishment of a complementary network of more than 2,800 Sainsbury’s, Asda and Argos stores and several of the UK’s most visited retail websites to create greater choice for customers through more store formats and channels, with a combined 47 million customer transactions per week.
  • The generation of of at least £500 million in net synergies and post price investments across the enlarged group. These are comprised largely of buying benefits, opening Argos in Asda stores and operational efficiencies.
  • There are no planned Sainsbury’s or Asda store closures as a result of the Combination
    A comprehensive range of channels and formats across supercenters, superstores, supermarkets, convenience stores and digital.

The companies said that there are no planned Sainsbury’s or Asda store closures as a result of the combination.