Sainsbury’s share price: Tesco deal sparks merger speculation

on Jan 31, 2017
Updated: Oct 21, 2019

Tesco’s (LON:TSCO) £3.9-billion tie-up with Booker could trigger a merger between FTSE 100 rivals J Sainsbury (LON:SBRY) and Wm Morrison Supermarkets (LON:MRW), analysts at Bank of America Merrill Lynch have said. Sainsbury’s, which bought Argos owner Home Retail Group last year, is seen as the best candidate for consolidation.

Sainsbury’s share price has been steady in London this morning, having inched 0.31 percent higher to 257.70p as of 10:13 GMT, in line with gains in the broader market, with the benchmark FTSE 100 index currently 0.09 percent better off at 7,125.14 points. Morrisons’ share price meanwhile has gained 0.59 percent to stand at 238.80p.
Sainsbury’s is the best candidate for consolidation and its geographic skew to the southeast fits in with Morrisons and Asda, The Times has reported, quoting BofA Merrill Lynch.

“Although Sainsbury’s differs from both Asda and Morrisons on concept, it is slightly more similar to the latter, making Morrisons the more likely candidate,” the analysts pointed out.
The comments come after rival Tesco disclosed last week that it had agreed to merge with Booker, which operates Londis and Budgens. The move is set to create Britain’s largest wholesale and retail food businesses, with combined annual sales of almost £60 billion, and could trigger a pick-up in mergers and acquisitions.

“The deal has lit the fuse on the firework of consolidation,” one industry insider told The Times, predicting that the other listed supermarket groups would look at merging with wholesalers.
The 15 analysts offering 12-month price targets for Sainsbury’s for the Financial Times have a median target of 255.00p on the stock, with a high estimate of 305.00p and a low estimate of 200.00p. As of January 28, the consensus forecast amongst 19 polled investment analysts covering the blue-chip supermarket advises investors to hold their position in the company.
As of 08:44 GMT, Tuesday, 31 January, J Sainsbury plc share price is 258.00p.

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