Key Takeaways
- • Sainsbury's and Morrisons, the UK's second- and sixth-largest supermarket chains, held merger talks between November and February, before Sainsbury's walked away.
- • Sainsbury's CEO Simon Roberts, in post for six years, is reported to be willing to consider buying a struggling rival, reviving UK grocery consolidation speculation.
- • Industry watchers say either Asda or Morrisons, or both, could disappear within a decade, with informal talks reportedly continuing among the three groups.
- • A combined Asda and Morrisons deal is seen as possible but weaker than a Sainsbury's takeover of either, because both face cost pressures and heavy debt.
- • Aldi is poised to overtake Asda as the UK's third-largest supermarket, with less than one percentage point of market share separating them.
Summary
Sainsbury's and Morrisons held merger talks between November and February, according to reports this week, before the larger Sainsbury's decided not to proceed. The revelation has revived speculation that the UK grocery market is ripe for consolidation. It also indicated that Sainsbury's chief executive Simon Roberts, who has led the company for six years, is at least willing to consider acquiring one of his troubled rivals. Sainsbury's operates about 600 supermarkets and almost 900 convenience stores.
Sainsbury's had been seen as cautious about reviving merger activity since its £7bn bid for Asda in 2019 was blocked. Industry experts nonetheless say the owners of Asda and Morrisons have held informal talks with each other, and with Sainsbury's, and expect discussions could restart. One industry source said "the three of them, one way or another, are talking to each other." That source suggested a combination of Asda and Morrisons was possible but would likely be a weaker transaction than a Sainsbury's takeover of either, as both businesses are struggling with costs and interest payments on significant debt.
Competitive pressure is reshaping the sector. Major supermarket groups have been competing for market share while capitalising on broader retail trends such as online grocery shopping and convenience formats. Aldi is rapidly opening stores and is poised to overtake Asda as the UK's third-largest supermarket, with less than one percentage point separating the two. Asda has struggled to find growth in recent years, which the article links to its weakening position.
Sainsbury's had been seen as cautious about reviving merger activity since its £7bn bid for Asda in 2019 was blocked. Industry experts nonetheless say the owners of Asda and Morrisons have held informal talks with each other, and with Sainsbury's, and expect discussions could restart. One industry source said "the three of them, one way or another, are talking to each other." That source suggested a combination of Asda and Morrisons was possible but would likely be a weaker transaction than a Sainsbury's takeover of either, as both businesses are struggling with costs and interest payments on significant debt.
Competitive pressure is reshaping the sector. Major supermarket groups have been competing for market share while capitalising on broader retail trends such as online grocery shopping and convenience formats. Aldi is rapidly opening stores and is poised to overtake Asda as the UK's third-largest supermarket, with less than one percentage point separating the two. Asda has struggled to find growth in recent years, which the article links to its weakening position.
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