JSAIY J Sainsbury Plc (QX)

By Philip Georgiadis of WSJ City 

British competition regulators said they could block the proposed merger between Asda, Walmart's UK arm, and rival J Sainsbury after finding "extensive competition concerns."The deal between the two supermarket giants would create the country's largest grocer at a time of intense pressure on the UK high street.

KEY FACTS

   -- The UK's Competition and Markets Authority said it has concerns the 
      merger could lead to a substantial reduction in competition. 
 
   -- It flagged possible higher prices, a poorer shopping experience, and 
      reductions in the range and quality of products offered. 
 
   -- The companies said the findings "misunderstand how people shop in the UK 
      today and the intensity of competition in the grocery market." 
 
   -- The CMA laid out possible remedies, including blocking the merger. 
 
   -- It also said the firms could sell off a significant number of stores and 
      other assets, including one of the Sainsbury or Asda brands. 
 
   -- However it warned: "it is likely to be difficult for the companies to 
      address the concerns it has identified." 

WHY THIS MATTERS

The combined firm would have revenues of around $70bn, and help both companies compete against a resurgent Tesco and increasingly popular discounters. However a regulatory intervention had always been flagged as a danger to the high-profile deal. Shares in Sainsbury dropped more than 13% after the CMA statement.

The companies will have the chance to respond, with a final report issued in April.

A fuller story is available on WSJ.com

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(END) Dow Jones Newswires

February 20, 2019 06:43 ET (11:43 GMT)

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