There were two immediate reactions to reports of advanced merger talks between J Sainsbury (SBRY) and Walmart subsidiary Asda: a) How did they manage to keep it under wraps for this long? b) It will never get past the regulators.
The mooted tie-up, if approved, would give the resultant entity control of around 30 per cent of the UK grocery sector, and leave competitors, particularly home-grown rivals Tesco (TSCO) and Morrisons (MRW) scrambling to meet the challenge of a group which, through increased scale, could pitch (with enhanced pricing power) more effectively at the premium and value ends of the market, also potentially bad news for the likes of Marks and Spencer (MKS), Waitrose and Germany's Lidl.
The proposed merger – which will be outlined in a preliminary statement on Monday 30 April - would almost certainly prompt a review from the Competition and Markets Authority (CMA), though the regulator has yet to confirm whether it has been involved in any discussions with the relevant parties. (You might reasonably ask whether the recent regulatory green light for Tesco’s acquisition of wholesaler Booker might have a decisive bearing on the outcome, though some would argue this isn’t exactly comparing like-with-like).
