Sainsbury’s has agreed to buy Walmart’s U.K. unit, Asda, for $10.1 billion in cash and stock in a deal that would create Britain’s largest supermarket chain and marks a profound shift in the country’s grocery market.
The deal combines Britain’s second- and third-largest supermarket chains, giving the combined company 31.4% of the market and putting it ahead of the current leader, Tesco, which has 27.6%, according to data from Kantar Worldpanel.
The company will retain both the Sainsbury’s and Asda brands and there are no plans to close any of its more than 2,800 stores, the companies said Monday. They aim to lower retail prices as much as 10% as a result of the deal.
“This is a transformational opportunity to create a new force in U.K. retail,” Sainsbury’s CEO Mike Coupe said.
Shares in Sainsbury’s jumped 20% to 325 pence (about $4.50) at the market open.
The move underscores the intense competition in Britain’s grocery market as discounters take market share from traditional chains such as Sainsbury’s and Tesco. Asda has a strong presence in the north of England and Sainsbury’s in the south.
Bentonville, Ark.-based Walmart Inc., meanwhile, is building fewer big stores and focusing more on internet businesses in an effort to compete for the online shoppers who use Amazon.
J Sainsbury plc, the chain’s corporate name, says Walmart will receive 4.3 billion pounds (about $5.9 billion) worth of Sainsbury’s stock and 2.98 billion pounds (about $4.1 billion) in cash. Walmart will own 42% of the combined company. Sainsbury’s said the deal will produce costs savings of at least $688 million due to increased efficiency.
The proposed merger is “consistent with our strategy of looking for new ways to drive international growth,” Judith McKenna, CEO of Walmart’s international business, said in the statement.