Sainsbury's would challenge CMA in courts if unhappy with Asda ruling

British supermarket group Sainsbury’s would challenge in the courts any unfavourable ruling by the regulator on its agreed takeover of rival Asda if it believed it was not backed up by published evidence, its boss said on Thursday.

George at Asda


The 7.3 billion pound deal to buy the UK arm of Walmart, a transaction that could see the combined group leapfrog Tesco as Britain’s biggest retailer, is being assessed by the Competition and Markets Authority (CMA).

The CMA said last month it expected to issue provisional findings early next year, ahead of a final report in March.

Sainsbury’s Chief Executive Mike Coupe told reporters he expected the CMA’s first report to be published in late January.

Sainsbury’s and Asda have both said they believe the CMA will not insist on a level of store disposals that will make the deal, announced in April, unpalatable.

“We remain confident in the case that we’re making to the CMA,” said Coupe, noting Sainsbury’s “key and central” argument was that the deal would lower prices for customers and that the regulator was an “evidence based organisation”.

“Ultimately the role of the CMA is to make sure there is no consumer harm and we would argue very strongly that there is a consumer good that will come out of this potential transaction,” he said.

Coupe told Reuters the supermarket group would take to judicial review any unsatisfactory ruling from the CMA it did not feel was backed up by published evidence, pointing out that legal avenue was available to all interested parties.
The CEO again declined to say how many forced store disposals would make the deal unattractive.

“To get into a conversation about numbers of store disposals, who to, when, is far too early and highly speculative,” he said.

However, a source with knowledge of the situation has told Reuters a figure “into the hundreds” could kill the deal.

Analysts are divided. Those at UBS, Sainsbury’s house broker, have a base case scenario of a modest 28-54 store disposals to satisfy the CMA. However, analysts at HSBC believe the deal will face stringent remedies or may be blocked.

BEAT FORECASTS

Coupe also talked up Sainsbury’s prospects with or without Asda after beating forecasts with a 20 percent rise in first half profit.

He said the group was on the right track in a sector that has faced pressure from the rise of discount chains and fears that online shopping giants could muscle into the territory.

“We have a clear strategy and you can see in the numbers today we’re delivering against that strategy. We’re adapting our business to changes in customers’ behaviour and we’ll continue to do so,” he said.

“We’re confident in our future whatever basis that future is.”

Coupe has already reshaped Sainsbury’s by buying general merchandise retailer Argos for 1.1 billion pounds in 2016.

Although industry data shows Sainsbury’s trading performance is lagging rivals, its shares are up 32 percent this year on the back of the Asda proposal. The stock was up 1.3 percent at 1619 GMT.

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