Shares in J Sainsbury (LON:SBRY) have soared more than 15 percent in London in today’s session, as the retailer announced that it had agreed a merger deal with Walmart’s Asda. The tie-up is set to create Britain’s biggest supermarket, surpassing rival Tesco (LON:TSCO), and comes amid stiff competition in the UK grocery market.
As of 08:24 BST, Sainsbury’s share price had added 15.68 percent to 312.10p, propping up the benchmark FTSE 100 index which currently stands 0.39 percent higher at 7,531.13 points. Shares in Tesco meanwhile have dipped 1.60 percent to 234.30p, while Morrisons (LON:MRW) is one percent down at 237.60p.
Sainsbury’s and Asda merger
Sainsbury’s announced in a statement this morning that it had agreed with Walmart the terms to a proposed combination with Asda to create an enlarged business. The tie-up will result in the US supermarket giant holding 42 percent of the issued share capital of the business and receiving £2.98 billion of cash, with the deal valuing Asda at about £7.3 billion. At the time of completion of the merger, Walmart will not hold more than 29.9 percent of the total voting rights in the enlarged group.
The merged group will be chaired by the Sainsburys çhairman and led by the FTSE 100 grocer’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 enlarged 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 chief executive Mike Coupe commented in the statement. “Having worked at Asda before Sainsbury's, I understand the culture and the businesses well and believe they are the best possible fit.”
FTSE 100 group’s results
Sainsbury’s separately announced its full-year results today, reporting underlying profit before tax of £589 million, marking a 1.4-percent rise year-on-year. The group’s like-for-like sales meanwhile climbed 1.3 percent. Sainsbury’s left its dividend unchanged at 10.2p per share.