Union cautious on Sainsbury–ASDA potential merger

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Ulster Farmers’ Union (UFU) president Ivor Ferguson has indicated that his organisation will be investigating the potential impact of the proposed Sainsbury: ASDA merger on primary producers here in Northern Ireland.

He said: “The UFU will be looking at the detail of the proposed merger between the two retailers carefully. Our priority is to understand what impact this may have on our members; both those farmers who are already part of the supply chains for these retailers and the potential wider impact on the industry.

“If the merger is approved it would give one company just over 31 per cent of the market share. We are obviously concerned that this concentration of retailer power could reduce competition in the supply chain and negatively impact on primary producers but it could also reduce choice and availability of products for consumers in the long term. We will be looking to Sainsbury’s and Asda to remain committed to sourcing local produce.”

Mr Ferguson added: “The merger has been referred to the Competition and Markets Authority (CMA) and the UFU would like to see an investigation that assesses the impact on the whole supply chain from consumer through to farm level.”

Agreed terms, which would lead to the merger of the two retailing businesses, were confirmed on Monday of this week. The deal values Asda, part of the Walmart group, at £7.3 billion

The Combination, as it is now referred to, will create one of the UK’s leading grocery, general merchandise and clothing retail groups, with combined revenues in the region of £51 billion for 2017. It will also combine a complementary network of more than 2,800 Sainsbury’s, Asda and Argos stores and several of the UK’s most visited retail websites with a combined 47 million customer transactions per week. Both the Sainsbury’s and Asda brands will be maintained.

Commenting on the Combination, David Tyler, Chairman of Sainsbury’s, said: “We believe that the combination of Sainsbury’s and Asda will create substantial value for our shareholders and will be excellent news for our customers and our colleagues.

“As one of the largest employers in the country, the combined business will become an even greater contributor to the British economy. The proposal will bring together two of the most experienced and talented management teams in retail at a time when the industry is undergoing rapid change. We welcome Walmart as a significant shareholder and look forward to working closely with them.”

Judith McKenna, President and Chief Executive Officer of Walmart International, commented: “This proposed merger represents a unique and bold opportunity, consistent with our strategy of looking for new ways to drive international growth. Asda became part of Walmart nearly 20 years ago, and it is a great business and an important part of our portfolio, acting as a source of best practices, new ideas and talent for Walmart businesses around the world. We believe this combination will create a dynamic new retail player better positioned for even more success in a fast-changing and competitive UK market. It will unlock value for both customers and shareholders, but, at the same time, it’s the colleagues at Asda who make the difference, and this merger will provide them with broader opportunities within the retail group. We are very much looking forward to working closely with Sainsbury’s to deliver the benefits of the combined business.”