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Following Saturday's announcement that the UK's second and third largest grocers were in advanced negotiations to merge, the two retailers have now outlined how they expect to execute combining the Sainsbury's and Asda businesses.

Key features of the merger

  • The combined group would create one of the UK's leading grocery, general merchandise and clothing groups, with combined revenues of £51bn for 2017.
  • The Sainsbury's and Asda brands would be maintained
  • Asda to continue to be run from Leeds and retain its own CEO
  • Sainsbury's, Asda and Argos store networks to be combined to create a complementary network of 2,800 stores and several of the UK's most visited websites
  • Walmart to own 42% of the share capital of combined business. It would keep two seats on the board of the new business, and receive £2.975bn of cash (subject to customary completion adjustments), valuing Asda at £7.3bn on a debt free, cash free and pension free basis

A full investigation by the Competition and Markets Authority (CMA) is now expected, with Sainsbury's and Asda aiming to complete the merger in H2 2019.

Rationale for the deal

In the merger document, Sainsbury's highlights how the retail sector is undergoing rapid change as customers' shopping habits continue to evolve, as evidenced through the shift to smaller baskets and more frequent shopping trips, the greatly increased popularity of the discount channel, the expansion of online and the blending of grocery and general merchandise businesses.

Customers' desire for greater value, choice and convenience has led to intense competition across grocery, general merchandise and clothing. By bringing together Sainsbury's and Asda, the two retailers expect to create a stronger and more resilient business.

Sainsbury's and Asda shared the following rationale:

  • The merger would enable investments in price, quality, and range while also creating more flexibility to shop in stores and across digital channels. Sainsbury's expects to lower prices by up to 10% on many products that customers buy regularly, while pooling the businesses’ channel expertise will create more options for shoppers
  • Their 330,000 employees should gain from new career opportunities, and no store closures are planned
  • The deal promises to deliver at least £500m of net synergies after investments in price.  £350m are expected from harmonising buying terms, £75m from opening Argos in Asda stores and £75m from operational efficiencies

 

Comments on the deal

Mike Coupe, CEO of Sainsbury's: "This is a transformational opportunity to create a new force in UK retail, which will be more competitive and give customers more of what they want now and in the future. It will create a business that is more dynamic, more adaptable, more resilient and an even bigger contributor to the UK economy. 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."

Judith McKenna, Walmart International, President and CEO:"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."

Roger Burnley, Chief Executive Officer of Asda:"The combination of Asda and Sainsbury's into a single retailing group will be great news for Asda customers, allowing us to deliver even lower prices in store and even greater choice. Asda will continue to be Asda, but by coming together with Sainsbury's, supported by Walmart, we can further accelerate our existing strategy and make our offer even more compelling and competitive. From my six years with Asda and ten years with Sainsbury's, I know first hand that both organisations are fortunate to employ some of the most talented and customer-focused colleagues in this market and I am excited by the opportunity of the two coming together."

13 November, London

With the theme of SUPPLY CHAINS FOR GROWTH, the interactive programme will allow you to create a day that will give you everything you need to enhance your food and grocery supply chain.

In a bold statement of its drive to be recognised as a destination for parcel collections, Asda has installed an eye catching parcel collection tower at the front or its Trafford Park store, allowing customers to pick up parcels in less than 60 seconds and also make returns.

Automating parcel services

The introduction of the 16 ft high automated tower follows a successful trial by Walmart at over 200 locations in the US. The technology allows customers to collect pre-ordered purchases through George.com or a third party retailer such as Asos, Missguided and Decathlon by scanning a barcode sent to their smartphone.

Developing Asda 'toyou'

The installation is an important advance for Asda's 'toyou' service. Launched in November 2015 as the UK’s first end-to-end parcel solution, it uses minute-by-minute tracking and allows consumers to return or collect purchases from third party online retailers at more than 600 Asda stores. Parcels can also be collected and returned from Asda petrol forecourts and Click & Collect points across the country.

Convenience for customers

Commenting on the launch Neil Drake, Asda’s toyou - Retail Process, Systems and Innovation Manager, said: “It’s great that we’ve been able to work with our parent company Walmart in the US to bring this new exciting technology to the UK, so far it’s been a huge success for them.

Adding to fulfilment infrastructure

The development of automated parcel collection technology comes as Asda continues to develop its online infrastructure. It complements the roll out of collection lockers to new locations to make asda.com convenient for more customers.

 

Asda and Walmart International have announced that Deputy CEO Roger Burnley will succeed Sean Clarke as CEO on January 1st. The two will work closely together in the run-up to the handover to ensure a smooth transition and the successful execution of Asda's Christmas strategy.

Burnley promoted to lead Asda

Burnley rejoined Asda in October 2016, after several years at Sainsbury's as retail and operations director. The move followed shortly after Sean Clarke's appointment as CEO in July 2016. At the time, Walmart International CEO Dave Cheesewright described Sean Clarke as “one of our most experienced global executives” whilst also recognising Roger as “a future CEO”. In today's announcement Cheesewright said: “Roger was purposefully brought back to Asda to partner with Sean ahead of the transition to Roger taking up the position of CEO. He and Sean have worked as a great team and I’m really confident in Roger’s ability to continue building upon our returning momentum."

Clarke to remain engaged with Walmart

Commenting on Clarke's achievements at Walmart, Cheesewright said "After more than 21 years with the company, Sean has worked across five international markets including serving as President and CEO of Walmart China and obviously here in the UK too. He’s continually shown the ability to lead critical transformation and the last 15 months are no exception. Sean will continue to lead Asda until the end of December after which, he’s taking some time out and will then remain engaged with Walmart."

Recovery underway at Asda

In a statement Roger Burnley, said: “Asda is a great business and we’ve started to realise its potential again. Sean’s focus on serving customers and simplifying the business has established a firm foundation on which we can build. Since I returned to Asda last year, I have been encouraged by the passion and professionalism of our colleagues and look forward to leading this terrific team.”

Hear direct from Asda

At the IGD Supply Chain Summit 2017, members of Asda's supply chain leadership team will detail Asda’s new plans for 2018 including a combination of physical logistics within ALS, supply chain collaboration and a view to the future of Asda's end-to-end supply chain strategy. To find out more and to book your place, click here.

Presentations

21/08/2018
An essential summary of supply chain priorities, latest network developments, and other key statistics for Asda.
02/05/2018
We explore how the UK's second and third largest retailers intend to combine their businesses.
10/11/2017
OSA is a bellwether of retail supply chain performance, helping direct routines and activities across the chain. As such, OSA is seen as the ultimate measure of supply chain success, helping drive value and growth into the supply chain. But the increasingly competitive food and grocery industry calls for new, innovative thinking to deliver the service necessary to succeed.

The supply chain industry is evolving rapidly, driving an incremental skills and talent shortage in its wake. Uncover the five routes to success to allow you to equip your supply chain for the challenge ahead.

In this presentation, we look at the key themes from IGD’s annual Supply Chain Summit and explore supply chain priorities for 2017 and beyond.

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A practical one day workshop for all roles in suppliers, to help develop your understanding of the vital part that supply chains play in underpinning FMCG businesses.