New details unveiled as Sainsbury's and Asda agree to shock merger

Following the announcement made on Saturday (April 28th) that Sainsbury’s and Asda are planning to merge, new details have now been released about the deal to combine the two supermarkets.

J Sainsbury plc and Walmart Inc. have now agreed terms in relation to the merger.

Following the merger, Walmart will hold 42% of the issued share capital of the combined business and receive £2.975bn in cash, which values Asda at approximately £7.3bn on a debt-free, cash-free and pension-free basis.

At the time of completion of merger, Walmart will not hold more than 29.9% of the total voting rights in the Combined Business.

The deal will see the the two supermarkets have a combined revenues of around £51bn for 2017, and have a network of more than 2,800 Sainsbury’s, Asda and Argos stores.

In addition, the combined business is expected to generate net EBITDA synergies, post investments in price of at least £500m. These synergies are comprised largely of buying benefits, opening Argos in Asda stores and operational efficiencies.

There are currently no planned Sainsbury’s or Asda store closures as a result of the merger.

Upon completion, two Walmart representatives will join the board of the merged businesses as non-executive directors.

The combined business will also be chaired by the Sainsbury’s chairman and led by the Sainsbury’s CEO and CFO. Asda will continue to be run from Leeds with its own CEO, who will join the group operating board.

David Tyler, Chairman of Sainsbury’s, said: “We believe that the combination of Sainsbury’s and Asda will create substantial value for our shareholders and will be excellent news for our customers and our colleagues.

“As one of the largest employers in the country, the combined business will become an even greater contributor to the British economy.

“The proposal will bring together two of the most experienced and talented management teams in retail at a time when the industry is undergoing rapid change. We welcome Walmart as a significant shareholder and look forward to working closely with them.”

Judith McKenna, president and chief executive officer of Walmart International, added: “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, also commented: “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.”

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