JSAIY J Sainsbury Plc (QX)

   By Ian Walker 
 

The U.K. Competition and Markets Authority said Wednesday that it could block the merger between J Sainsbury PLC (SBRY.LN) and Asda Group Ltd. (AGP.YY) if its concerns can't be addressed.

The regulator said it has provisionally found that the deal between the U.K.'s second- and third-largest grocers could push up prices and reduce quality. It also said the merger could lead to a rise in prices at a large number of Sainsbury's and Asda petrol stations.

The regulator has set out potential remedies to address its concerns, including blocking the deal or forcing the companies to sell a significant number of stores or other assets. Selling one of the Sainsbury or Asda brands could reduce the anticompetition risk, it said.

Nevertheless, the CMA said it currently believes it would be difficult for the companies to address the concerns it has identified. It is seeking comments from interested parties by March 13 and expects to announce a final report by April 30.

Sainsbury said it "fundamentally" disagrees with the provisional findings, citing a misunderstanding of people's shopping habits in the U.K. today. It said the "CMA has moved the goalposts, and its analysis is inconsistent with comparable cases."

"We are surprised that the CMA would choose to reject the opportunity to put money directly into customers' pockets, particularly at this time of economic uncertainty," the U.K's second-largest grocer by market share said.

Last April, U.S. retailer Walmart Inc. (WMT) said it would sell Asda to Sainsbury's for 7.3 billion pounds ($9.5 billion) in cash-and-shares. If the merger is approved, it will create the largest supermarket group in Britain.

Last week the U.K.'s Competition and Markets Authority extended the timetable of its inquiry into the proposed merger due to the case's scope and complexity.

The regulator said the deadline for its report on the deal has been pushed back to April 30 from March 5. The CMA's provisional findings on the deal are still expected this month.

Write to Ian Walker at ian.walker@wsj.com

(END) Dow Jones Newswires

February 20, 2019 02:51 ET (07:51 GMT)

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