UK supermarket giants Sainsbury's, Asda agree merger

Britain's second and third biggest supermarket chains Sainsbury's and Walmart-owned rival Asda have agreed to merge, the pair said Monday, creating a retail king that would leapfrog current leader Tesco.

The blockbuster deal comes as the UK retail sector faces squeezed profit margins due to fierce competition from German-owned discounters Aldi and Lidl -- as well as major online players like US titan Amazon.

‘Sainsbury's and Walmart Inc. are pleased to announce that they have agreed terms in relation to a proposed combination of Sainsbury's and Asda Group Limited, a wholly owned subsidiary of Walmart, to create an enlarged business,’ they said in a statement after confirming advanced talks over the weekend.

The transaction values Asda at £7.3 billion ($10 billion, 8.3 billion euros). Walmart will own 42 percent of the combined business and also receive £2.97 billion in cash.

However, it still remains subject to approval from Britain's Competition and Markets Authority (CMA) regulator, amid concerns over the impact on consumer choice and jobs.

The combined business would have total revenues of £51 billion and boast a network of 2,800 Sainsbury's, Asda and Argos stores.

No store closures are planned and both brand names will continue to operate side by side.

‘The retail sector is going through significant and rapid change, as customer shopping habits continue to evolve,’ Sainsbury's added.

‘This has led to increased competition across grocery, general merchandise and clothing, as customers seek ever greater value, choice and convenience.

‘Bringing Sainsbury's and Asda together will result in a more competitive and more resilient business that will be better able to invest in price, quality, range and the technology to create more flexible ways for customers to shop.’

Sainsbury's previously bought catalogue retailer Argos in 2016 for £1.4 billion.

In Britain's fast-changing retail landscape, Tesco meanwhile purchased wholesaler Booker for £3.7 billion earlier this year.