Shares in J Sainsbury (LON:SBRY) have fallen into the red in London in today’s session, ahead of the Competition and Markets Authority’s (CMA) final report on the grocer’s proposed merger with Walmart’s Asda. The watchdog is largely expected to reject the proposal after signalling earlier this year that its investigation into the tie-up had raised ‘extensive competition concerns’.
As of 13:46 BST, Sainsbury’s share price had given up 2.26 percent to 225.00p, underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.61 percent lower at 7,477.06 points. The grocer’s shares have given up more than 15 percent of their value over the past year, as compared with about a one-percent gain in the Footsie.
CMA decision expected tomorrow
The CMA disclosed today that the expected date of publication of its report into Sainsbury’s proposed tie-up with Asda is tomorrow. The news comes after the watchdog said in February that it had ‘extensive competition concerns’ over the tie-up and that it thought it was ‘likely to be difficult’ for the parties to address them.
Proactive Investors quoted JPMorgan as commenting today that it thought that the CMA would either block the merger or state a conditional approval subject to the agreement of remedies.
“We think the former is significantly more likely, but both scenarios could ultimately lead Sainsbury and Asda to abandon the idea of the merger,” the broker pointed out, adding that it sees Sainsbury’s share price falling towards its 190p target after the watchdog announces its decision.
Jefferies sees 20% chance of approval
“In reality, we struggle to assume anything beyond a 20-percent chance of a drastic rethink by the CMA,” Jefferies commented, quoted by Proactive Investors, adding that “a recourse by the two grocers to a judicial review is not necessarily a given, and will need to reflect the balance of probability of success and the lengthy timetable that such an action would imply”.