Shares in J Sainsbury (LON:SBRY) have fallen deep into the red in today’s session as the Competition and Markets Authority (CMA) blocked the grocer’s proposed merger with Walmart’s Asda. The move came after the watchdog pointed to significant competition concerns earlier this year.
As of 10:01 BST, Sainsbury’s share price had given up 5.25 percent to 214.70p. The shares are weighing on the benchmark FTSE 100 index which currently stands 0.39 percent lower at 7,442.67 points.
CMA move hits Sainsbury’s share price
Shares in the blue-chip grocer have been sold off this morning as the CMA issued its final report on the group’s merger with Asda, saying it had found out that “UK shoppers and motorists would be worse off” following the merger “due to expected price rises, reductions in the quality and range of products available, or a poorer overall shopping experience”.
“We have concluded that there is no effective way of addressing our concerns, other than to block the merger,” Stuart McIntosh, chair of the CMA inquiry group, commented in a statement.
Sainsbury’s issued a short statement following the watchdog’s report, with CEO Mike Coupe commenting that the CMA conclusion ignored “the dynamic and highly competitive nature of the UK grocery market”. The companies had previously proposed to sell between 125 and 150 of their supermarkets to allow the merger to proceed, and had pledged to deliver £1 billion of price cuts.
‘Shareholders should be very angry’
The Guardian quoted Ratula Chakraborty, professor of business management at UEA’s Norwich Business School, as commenting that “serious questions must be asked about the folly of the senior management of Sainsbury’s and Asda to pursue a merger that had no chance of being approved by the CMA,” and adding that “shareholders should be very angry at the time and money wasted on this hopeless venture”.
Sainsbury’s is scheduled to update investors on its full-year performance on May 1.