Walmart is selling its British unit, Asda, to local rival Sainsbury’s for $10.1 billion, a deal that lets the world’s largest retailer focus on online sales in countries where it has stronger growth prospects and faces less-intense competition.
The cash and stock deal will reshape Britain’s supermarket industry. It combines the No. 2 and No. 3 supermarket chains, with a total 31.4 percent share of the market that would put it ahead of the current leader, Tesco, according to data from Kantar Worldpanel.
FILE – In this file photo dated Wednesday, June 17, 2009, a branch of Sainsbury’s supermarket is seen in Selsdon, south London. It is reported Monday April 30, 2018, Sainsbury’s has agreed a merger deal with Walmart Inc.’s U.K. unit, Asda, for 7.3 billion pounds (dollars 10.1 billion U.S.) in cash and stock in a deal that would create Britain’s largest supermarket chain, but the deal is expected to be subject to review by Britain’s Competition and Markets Authority. (AP Photo/Sang Tan, FILE)Walmart overall is building fewer big stores and increasing its focus on internet businesses as people shop more online and at sites like Amazon. The company is expanding services like same-day delivery in the U.S., while focusing on big prizes overseas like China and potentially India. Walmart is reportedly in talks to buy a majority stake in Flipkart, India’s leading e-commerce company, which would give it a foothold in an exploding online market.
“Given the competitive landscape in U.K. grocery retail, profitable growth and expansion opportunities are limited, so reducing resources makes sense – especially when there are other geographies and channels” with more opportunity for growth, said Moody’s Lead Retail Analyst Charlie O’Shea.
In Britain’s grocery market, discounters have taken market share from traditional chains such as Sainsbury’s and Tesco. Asda was also fighting to compete with no frills German-based discounters Aldi and Lidl, which offer sharp discounts but limited assortments.