Shares in J Sainsbury (LON:SBRY) have fallen into the red in today’s session as the Competition and Markets Authority (CMA) warned that the grocer’s proposed merger with Asda could impact competition in 463 local areas in the UK. The update came after the watchdog recently referred the tie-up to an in-depth investigation.
As of 13:54 BST, Sainsbury’s share price had given up 0.85 percent to 316.20p, underperforming the broader UK market, with the benchmark FTSE 100 index having climbed into positive territory and currently standing 0.31 percent higher at 7,535.09 points. The group’s shares have added just under a third to their value over the past year, as compared with about a three-percent rise in the Footsie.
Merger with Asda to impact 463 areas
The CMA published the results of its Phase I investigation, noting that it believed that the merger between Sainsbury’s and Asda gave ‘rise to a realistic prospect’ of a substantial lessening of competition (SLC) in 463 local areas.
“At a local level, the Parties’ stores overlap in several hundred local areas across the UK,” the watchdog pointed out.
WebFG News quoted market analyst Neil Wilson at Markets.com as commenting that it was “a given that the CMA will demand disposals if it does approve the merger, but this is already be factored in by both Sainsbury’s and Asda”.
“The question is how many stores they need to lose – too many could break the deal,” he pointed out, adding that today’s statement suggested that the watchdog “may be less well disposed to this deal than the market had thought”.
Analysts on FTSE 100 supermarket
Berenberg Bank reaffirmed Sainsbury’s as a ‘buy’ last week, while hiking its price target on the shares from 300p to 369p. According to MarketBeat, the blue-chip grocer currently has a consensus ‘hold’ rating and an average price target of 310.69p.