The merger of Sainsbury’s and Asda is on the verge of collapse after the competition regulator raised extensive concerns, is the lead business story in The Times (£). “J Sainsbury’s planned £7.3bn takeover of rival Asda was on the brink of collapse” writes the Financial Times £, while The Telegraph says Sainsbury’s vows to fight on as merger thrown into doubt. The Daily Mailsays the CMA “issued a damning assessment of the proposed deal”. Analysts were sceptical that the merger could be re-engineered sufficiently to allow it to be cleared (The Guardian). The supermarkets accuse the CMA of moving the goalposts after it says a combined company may have to spin off one of the brands (Sky News), while Sainsbury’s shares have dived 15% on the news (The BBC).
“Sainsbury’s Asda deal is negative for UK consumers,” says an editorial in the FT. “[The CMA] has dealt a probably deadly blow to the planned £7.3bn merger, in provisional findings the retailers call misconceived and inconsistent. For shoppers, however, the findings are right.” (The Financial Times £).
In retrospect it seems foolish to have hoped that the combination of the UK’s second and third biggest supermarkets could have been given the same blessing as that of a supermarket and a wholesaler, writes Ashley Armstrong in The Telegraph.
Sainsbury’s must accept its Asda merger has been canned, writes Phillip Inman in The Guardian. Chief executive Mike Coupe’s strategy shows he is lost in the retail jungle and lacks a plan B. (The Guardian)
Critics of the proposed tie-up between Asda and J Sainsbury were quick to cheer the competition regulator’s findings yesterday. The Food and Drink Federation, which represents manufacturers across the sector, said that it welcomed the Competition and Markets Authority’s provisional report. (The Times £)
Sainsbury’s tie-up with Asda seemed a done deal but its demise may cost singing boss his job, writes The Times (£). Sainsbury’s boss Mike Coupe is fighting for his future after the grocer’s proposed £14billion merger with Asda was declared ‘dead in the water’ (The Daily Mail).
Several aspects of the CMA’s verdict raised eyebrows, writes The FT. One was the low threshold adopted for the “gross upward pricing pressure index”, or Guppi. This metric attempts to quantify the concern that prices for consumers would rise because of weakened competition. The companies said the cut-off was set far too low in comparison with other transactions in the UK and elsewhere, and underplayed its often-repeated intention to lower prices for customers (The Financial Times £).
The FT’s Lex column says the regulator could be right to block the deal, but its judgment is based on technocratic voodoo. “The CMA cites public surveys of a kind that the failures of political polling companies should have invalidated. These feed into a metric called “gross upward pricing pressure index”. The Guppi metric brings spurious numerical accuracy to guesstimates of whether savings for local consumers outweigh likely price rises.” (The Financial Times £)
A key comment from the regulator, and one that could go a long way to scuppering the deal, is that despite the rise of online retailers and discounters, large supermarkets “remain important” in Britain and just under 90% of customers still conduct a main weekly shop. (The Times £)
An Asda-Sainsbury’s merger was supposed to ease Walmart’s international headache; now Judith McKenna, 53, the American retailer’s British-born international chief, will be looking for the aspirin — and, quite possibly, a new buyer. (The Times £)
The ruling on the proposed merger is the first big test for the Competition and Markets Authority since Lord Tyrie became chairman last year (The Times £). In a previous life the former Tory MP was the terror of the banks as chair of the Treasury Select Committee. It was entirely predictable he was going to take a tough line in his new gig (The Daily Mail).
It never seemed likely that the first big deal overseen by newish CMA chairman Andrew Tyrie would be the creation of a UK supermarket duopoly, writes Alistair Osborne in The Times (£), even if that seems to have come as a big shock to the pair’s financial advisers UBS, Morgan Stanley and Rothschild.
The FT says the CMA’s action points to a more aggressive approach by competition authorities in the UK and Europe. “UK competition authorities on Wednesday all but killed the £7.3bn supermarket deal, making it the second time this month European regulators have moved to prevent big corporations from getting even bigger.” (The Financial Times £)
UK and Irish retailers have joined forces to warn that higher shop prices will be inevitable if the UK leaves the EU without a deal, as the impact on supply chains and operating costs would be “devastating” (The Telegraph). A no-deal Brexit could lead to tariffs of 40% or more being imposed on food such as beef and cheddar cheese, driving up prices in shops and squeezing household budgets across the UK and Ireland, retail organisations from both countries have warned (The Guardian).
With fears over long delays, high trade tariffs and a lack of migrant workers, The Guardian looks at Brexit contingency plans for retailers and farmers. (The Guardian)
An “unfair” business rates system is making it too hard for high street retailers to compete with their online rivals, MPs have warned in a report that calls for reforms to revive town centres (The Times £). The government should consider “wide reforms” to business rates and planning law to allow Britain’s town centres and high streets to flourish in future decades, a parliamentary committee has said (The Financial Times £). British towns must brand themselves with a unique selling point or face extinction, MPs have warned (The Telegraph). City centres are in danger of becoming ghost towns as shopping habits change, a committee of MPs has warned (The BBC). The government should consider taxing online sales, deliveries or packaging and cutting property taxes for retailers as part of a package to help revive the UK’s ailing high streets, according to an influential group of MPs (The Guardian). The government must reform the tax system to “level the playing field” between online and high street retailers, according to an MPs’ blueprint for saving town centres (Sky News).
The chief executive of Kraft Heinz, Bernardo Hees, says that valuations among its peers have become “more attractive” since its $143bn swoop for Unilever collapsed two years ago, an indication that the acquisitive owners of the food company could soon return to dealmaking. (The Financial Times £)
Kraft Heinz’s share price has dropped by a third since the two iconic consumer brands merged in 2015. Now, almost exactly two years after Kraft Heinz failed to acquire Unilever for $143bn, some investors fear 3G’s famed model might be going out of fashion. (The Financial Times £)
Shares in McBride fell by a third after issuing an unscheduled profit warning a day ahead of its half-year results (The Telegraph). McBride, which supplies own-label detergents as well as toothpastes and mouthwashes to supermarket chains, said that higher costs for raw materials and distribution would hit its annual underlying pre-tax profits by between 10%-15% (The Times £).
One of Just Eat’s largest shareholders has renewed its attack on the takeaway company, in a blistering criticism of management. (The Daily Mail)
Uber will cut fees for food delivery in the UK and Ireland and allow restaurants to use its app but carry out their own deliveries as competition intensifies with Just Eat and Deliveroo, its biggest food delivery rivals outside the US. (The Financial Times £)
Wesfarmers shares jumped on Thursday after the Australian group reported higher net profit in the six months to December and announced a A$1.1bn ($811m) special dividend following the demerger of supermarkets chain Coles. (The Financial Times £)
No comments yet