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Walmart, Sainsbury combine Sainsbury's and Asda Group

04 May '18

3 min read

Walmart and J Sainsbury have combined Sainsbury’s and Asda Group, Walmart’s UK retail subsidiary. Amidst changes in the retail sector, the Combination brings together two distinctive customer propositions to create a more competitive, adaptable and resilient business - one of the UK’s leading grocery, general merchandise and clothing retail groups.

The new business is expected to be better placed to invest in price, quality, range and more flexible ways for customers to shop.

Under the terms of the Combination, which is subject to various approvals, including from the Competition and Markets Authority, Walmart would hold 42 per cent of the share capital of the Combined Business. This holding will be made up of 29.9 per cent of Sainsbury’s ordinary shares, with full voting rights attached, with the balance held as non-voting shares convertible into voting shares. In addition, Walmart would receive approximately £2.975 billion in cash, subject to customary closing adjustments, valuing Asda at approximately £7.3 billion on a debt-free, cash-free and pension-free basis.

Walmart would retain the Asda defined benefit pension scheme as part of the combination, along with any ongoing defined benefit pension related obligations.

"We believe the Combination offers a unique and exciting opportunity that benefits customers and colleagues,” said Doug McMillon, Walmart’s president and chief executive officer. “As a company, we’ve benefited from doing business in the UK for many years, and we look forward to working closely with Sainsbury’s to deliver the benefits of the combination."

Walmart is embracing technology and thinking differently to serve customers and drive growth. That includes developing partnerships like this one to unlock value for shareholders and customers in the UK.

As a strategic long-term partner, Walmart will share its global retail network and knowledge. The Combined business will have enhanced capabilities and a strengthened balance sheet to help deliver value and opportunities for customers, colleagues, suppliers and shareholders of both businesses.

The new business will operate a distinctive dual brand strategy. Asda would continue to be run from Leeds by its own CEO, Roger Burnley, who would join the Group Operating Board of the Combined Business, ensuring Asda retains its heritage and roots.

The combination will generate net synergies, post price investments, across the enlarged group of at least £500 million. These are comprised largely of buying benefits, opening Argos in Asda stores and operational efficiencies. There are no planned Sainsbury’s or Asda store closures as a result of the Combination.

Based on the current deal terms, Walmart expects to recognise a non-cash loss of approximately $2 billion, which is based on the current value of shares to be received and current foreign exchange rates. (SV)

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