>> The UK's second largest supermarket, Sainsbury's, has agreed to forge a pact with Walmart's Asda. It aims to create Britain's grocery leader by market share, overtaking current number one supermarket chain Tesco. Reuters Paul Sandle is following the story in London.>> Well, Sainsbury's and Asda are calling it a merger, but Sainsbury's will have the biggest shareholding.
They are paying money to Walmart, Asda's parent, although they will retain an equity stake. And all the top management will come from Sainsbury's, so it is pretty much a takeover.>> Sainsbury's set to acquire Asda for $10 billion. The deal could help it battle growing competition from German discounters Aldi and Lidl as well as online rival Amazon.
Sainsbury's CEO, Mike Coupe, set to run the new entity with both brands set to continue to operate. The cash and shares deal could also provide a potential exit route for Walmart, as Asda, which it bought in 1999 for over $9 billion, has been struggling to grow over the last 5 years.
Now the US giant will get 42% of the newly combined business, which is valued at over $18 billion. The news has shaken up the retail sector, with Sainsbury's shares jumping as much as a fifth in early Monday trading, hitting their highest in four years. The company argues it will also be good news for consumers.
Sainsbury's pledging to cut prices saying the deal will allow it to make savings of up to $700 million. But regulators could see things differently.>> But could actually be blocked entirely by the regulator or, otherwise, they will take action to make sure there were not monopolies in local areas.
It could mean that hundreds of stores have to be disposed of to rivals to get this through.>> They're only saying Monday that it was likely to review the deal.