Sainsbury’s shares shot up more than 20 per cent as trading opened on Monday after the supermarket confirmed it has agreed the terms of a proposed merger with Asda .
According to a statement made to the London Stock Exchange, the deal will result in Walmart, owner of Asda, holding 42 per cent of the new combined company and receiving £2.975bn in cash, valuing Asda at £7.3bn. The combined group would have a value of £5.9bn , making it bigger than the current market frontrunner, Tesco.
The new group will be run by the Sainsbury’s chairman, chief executive and finance chief, while Asda will continue to be run from Leeds by its own CEO, the firms said.
Sainsbury’s boss Mike Coupe said the deal was a “transformational opportunity to create a new force in UK retail”.
“It will create a business that is more dynamic, more adaptable, more resilient and an even bigger contributor to the UK economy,” he added.
“Having worked at Asda before Sainsbury's, I understand the culture and the businesses well and believe they are the best possible fit. This creates a great deal for customers, colleagues, suppliers and shareholders and I am excited about the opportunities ahead and what we can achieve together."
Naeem Aslam, chief markets analyst at Think Markets, said: “With this merger, the combined entity would not only be in a better position to fight the German discounters such as Aldi and Lidl but also Amazon’s recent move in the grocery space.”
