CMA block merger > Extensive competition concerns
- Supermarkets: Over 500 stores overlap – c.50% of the supermarket portfolio
- Disposals unlikely to address concerns – neither suitable purchaser nor a package of assets could be found
- Discounters not an effective alternative to one-stop supermarkets
- Online: Only three operators (Tesco, Sainsbury’s, Asda) has national presence via store pick model
- Pure online players (Ocado, Amazon) limit services to certain parts of the UK Entry or expansion by pure online players unlikely to offset competition concerns
- Fuel:635 PFS operated with 18% market share > 120 sites overlap with a lack of local competition
Our view
Sainsbury’s
- Refocus on cost-cutting and improve pricing
- Deeper integration of Argos into store network
- Fresh investment in stores and online distribution
Walmart/Asda
- Seek an alternative buyer
- Private equity – quick exit option but not strategic
- Spin-off to European grocer possible, attracted by Asda’s UK market foothold
- Walmart strategic tie-up
- Target for Amazon?
