25th February 2019
After the CMA's provisional findings, what is next for Asda and Sainsbury's?
The CMA’s provisional findings on Sainsbury and Asda’s proposed merger brought some common-sense to the crazy world in which we live. For once, it could be said of recent times, ‘the establishment’ has done its job. Such is the erosion of public institutions’ credibility, that is a remarkable comment, but it is the world in which we live. We found few, very few, supporters of the proposed merger and yet it was remarkable how unsure we had to be until the provisional decisions emerged. That said, the CMA’s comments are still provisional and so Sainsbury and Asda may seek to keep the fire alive despite a thorough hose down. If a mortal blow has been delivered, what next for Sainsbury and, perhaps more notably Asda, given that its parent has, effectively, as one of the more naïve and risky elements of this proposed deal, said that it no longer wants its British corporate child anymore? We struggle to see Asda remaining in its present form and British weekend press surrounding a potential acquisition by big PE is probably the sign of things to come. As for Sainsbury, well a new Chairman probably must cast his eye over the ashes of this proposed merger; quite what the outcome will be remains to be seen. We worry about our forecasts for Sainsbury and in the absence of near-term corporate activity reiterate our recently announced SELL recommendation albeit there is value at a certain price. In this short note we discuss the potential legacy of the CMA’s provisional findings.