Supermarket giant Sainsbury’s has announced it has agreed terms with Walmart to merge with fellow rival Asda, which would potentially see cost savings of "at least £500m", according to the retailer.
The new deal will mean Walmart will hold 42% share in the combined business in a transaction worth nearly £3bn to the Leeds-based supermarket. Both retailers said the move may mean many products could see a 10% reduction in price.
The Combined Business will be chaired by the Sainsbury's Chairman and led by the Sainsbury's CEO and CFO. Asda will continue to be run from Leeds with its own CEO, who will join the Group Operating Board of the Combined Business.
Commenting on the merger, David Tyler, Chairman of Sainsbury's, said: “We believe that the combination of Sainsbury's and Asda will create substantial value for our shareholders and will be excellent news for our customers and our colleagues.
“As one of the largest employers in the country, the combined business will become an even greater contributor to the British economy. The proposal will bring together two of the most experienced and talented management teams in retail at a time when the industry is undergoing rapid change. We welcome Walmart as a significant shareholder and look forward to working closely with them.”
Mike Coupe, Chief Executive Officer of Sainsbury's, said: “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.
“It will create a business that is more dynamic, more adaptable, more resilient and an even bigger contributor to the UK 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.”
Judith McKenna, President and Chief Executive Officer of Walmart International, commented: “This proposed merger represents a unique and bold opportunity, consistent with our strategy of looking for new ways to drive international growth. Asda became part of Walmart nearly 20 years ago, and it is a great business and an important part of our portfolio, acting as a source of best practices, new ideas and talent for Walmart businesses around the world.
“We believe this combination will create a dynamic new retail player better positioned for even more success in a fast-changing and competitive UK market. It will unlock value for both customers and shareholders, but, at the same time, it’s the colleagues at Asda who make the difference, and this merger will provide them with broader opportunities within the retail group. We are very much looking forward to working closely with Sainsbury's to deliver the benefits of the combined business.”
Roger Burnley, Chief Executive Officer of Asda, added: “The combination of Asda and Sainsbury's into a single retailing group will be great news for Asda customers, allowing us to deliver even lower prices in store and even greater choice. Asda will continue to be Asda, but by coming together with Sainsbury's, supported by Walmart, we can further accelerate our existing strategy and make our offer even more compelling and competitive.
“From my six years with Asda and ten years with Sainsbury's, I know first hand that both organisations are fortunate to employ some of the most talented and customer-focused colleagues in this market and I am excited by the opportunity of the two coming together.”