The Competition and Markets Authority (CMA) has referred the proposed merger between J Sainsbury (LON:SBRY) and Walmart’s Asda to an in-depth investigation, the watchdog has said. The two supermarkets announced the merger deal earlier this year with the move set to create Britain’s biggest grocer, surpassing Tesco (LON:TSCO).
Sainsbury’s share price has fallen deep into the red in today’s session, having given up 1.25 percent to 316.70p as of 09:43 BST. The shares are underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.16 percent lower at 7,288.80 points.
The CMA announced in a statement this morning that Sainsbury’s deal to buy Asda raised “sufficient concerns to be referred for a more in-depth review,” adding that the companies were two “of the largest grocery retailers in the UK and their stores overlap in hundreds of local areas, where shoppers could face higher prices or a worse quality of service”.
The move comes after Sainsbury’s chief executive recently admitted that there were some ‘extreme scenarios’ where the regulatory remedies demanded might make it difficult to complete the deal.
Proactive Investors noted in its coverage of the news that researchers reckon that the watchdog recommend the enlarged group sells off around 75 of its combined stores, while other analysts put that figure closer to 300.
The deadline for the in-depth review is March 5 next year.
Latest Kantar data
In a separate development, Kantar Worldpanel said yesterday that sales at Sainsbury’s had climbed at their fastest rate since December in the 12 weeks to September 9, while its share of the market fell by 0.4 percentage points to 15.4 percent. Asda’s market share meanwhile stands at 5.1 percent, down 0.2 percentage points on last year.