Regulator increases pressure on Sainsbury’s over proposed merger

Potential that the deal may be blocked led to the retailer’s shares opening down.

Article updated: 21 February 2019 9:00am Author: Graham Spooner

  • Concerns over higher prices and a worse consumer experience have led to increased regulatory pressure over merger.
  • Sharp decline in odds for the deal happening has a pulled share price down 12.5%.
  • We maintain our ‘hold’ recommendation for the time being.

pressure on sainsburys over merger

The UK regulator upped the ante on Sainsbury this morning with regard to its proposed merger with Asda and in reply Sainsbury appears to be saying “you don’t know what you’re doing”.

The regulator has come out with a strongly worded statement over its concerns stating that it could lead to a worse experience for consumers as a potential result of higher prices especially for petrol and reduction in products and quality.

So this could mean the deal might be blocked or for them to have to sell more stores than at first thought. A final report from the regulator is set for 30 April.

In response Sainsbury has come out of the blocks quickly and fairly aggressively in stating that it “fundamentally” disagrees.

The shares as a result opened down 15% and have now returned close to pre-deal levels. Market doubts had been growing on the deal and the odds have shortened considerably on the deal being scuppered. For the time being we suggest a medium risk hold.


All information given including prices, yields and our opinion is correct at the time of publication. Our opinions on investments can change at any time and for our latest view please go to www.share.com. To understand how our Investment research team arrive at their views please read our Investment Research Policy.

Graham Spooner portrait photo
Graham Spooner

Investment Research Analyst

Graham started out as a fully authorised dealer on the Stock Exchange trading floor and for various banks, before becoming an FSA-approved investment adviser. Now a respected voice in the media, Graham’s share tips and comments on the markets are frequently sought by the national press.