JSAIY J Sainsbury Plc (QX)

By Ian Walker

J Sainsbury PLC (SBRY.LN) and Asda Group Ltd. (AGP.YY) Thursday threw in the towel on their planned merger after the U.K. Competition and Markets Authority blocked it nearly a year after the two grocers first agreed to combine.

The regulator said that the merger between the U.K.'s second- and third-largest grocers would lead to a "substantial lessening of competition in a number of markets in the U.K." and therefore has decided to prohibit the merger in its entirety.

Sainsbury said that the CMA's ruling ignores the "dynamic and highly competitive" nature of the U.K. grocery market and is effectively taking 1 billion pounds ($1.29 billion) out of customers' pockets.

"Sainsbury's is a great business and I am confident in our strategy. We are focused on offering our customers great quality, value and service and making shopping with us as convenient as possible," Chief Executive Mike Coupe said.

The CMA indicated earlier this year that it could block the deal after saying that the merger could push up prices, reduce quality and lead to a rise in prices at a large number of their petrol forecourts. The CMA had also said it could force the companies to sell a significant number of stores or other assets, including one of the Sainsbury or Asda brands.

Sainsbury argued that the merger would deliver lower prices to consumers and committed to deliver GBP1 billion of savings by the third year after the deal completed. The FTSE 100-listed company also said it would invest GBP300 million in the first year of the combination, as well as a further GBP700 million over the next two years, with the aim of reducing prices on common items by around 10%.

Sainsbury and Asda--which is owned by Walmart Inc. (WMT)--put forward a proposal on March 22 to sell up to 150 stores and a number of gas stations to satisfy the CMA. However, they said at the time that they didn't think a divestiture remedy was necessary or proportional in relation to online delivered grocery shopping.

Last April, U.S. retailer Walmart said it would sell Asda to Sainsbury for GBP7.3 billion in cash-and-shares.

Write to Ian Walker at ian.walker@wsj.com; @IanWalk40289749

(END) Dow Jones Newswires

April 25, 2019 02:36 ET (06:36 GMT)

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