Sainsbury’s $9.4 Billion Acquisition Blocked by UK Competition Regulator

Business

As far as antitrust regulatory authorities are concerned, the United Kingdom has almost always been one of the toughest countries in the world, and it proved to be so yet again as the country’s competition regulator blocked the mega-merger between two of the biggest departmental stores. In April of 2018, one of the country’s biggest departmental stores, Sainsbury’s had agreed to acquire another mega departmental store ASDA in a deal that was worth $9.4 billion. However, a merger of that sort was always going to come under the scrutiny of the Competition and Markets Authority (CMA), the competition watchdog of the country. On Thursday, the regulatory body announced that they were blocking this deal. The CMA stated the danger of customers being forced to pay higher prices was the reason behind its decision.

The combined entity would have been a behemoth and become the biggest departmental store chain in the country. The move was tailored to go past Tesco as the nation’s largest departmental store chain, but now that plan is in shambles. Walmart, which owns Asda, was looking to exit its operations in the UK, but after the blocking of this deal, they would not be able to do so. The affected parties had the option of challenging the decision at the Competition Appeal Tribunal, but they decided to cancel the deal after the CMA decided to block it.

According to the findings of the CMA, the creation of such a huge departmental store chain was bound to eat into fair competition in the industry and eventually lead to monopolistic tendencies, which could result in regular customers being asked to pay higher prices for products. The chairman of the inquiry at CMA, Stuart McIntosh said, “We have concluded that there is no effective way of addressing our concerns, other than to block the merger.” The CMA was expected to come up with his initial findings in February, and at the time, the regulatory had, in fact, advised against this deal. Sainsbury’s stock price has been depressed over the past three months, and it is believed the reason behind the poor performance is linked to the fact that this mega acquisition was in regulatory limbo. Mike Coupe, the Chief Executive Officer of Sainsbury’s, however, stated that the merger with Asda would have actually led to the reduction of prices and went on to say that the CMA had ignored the healthy competition in the UK grocery market.

Jay Richardson

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