UK Competition Watchdog Opens Formal Probe into Sainsbury, Asda Merger -- Update

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By Maryam Cockar

The U.K. competition regulator has launched a formal investigation into the proposed merger between supermarket chains, J Sainsbury PLC (SBRY.LN) and Asda Group Ltd. (AGP.YY), to asses how the deal could affect U.K. shoppers.

The Competition & Markets Authority said Thursday that it will begin the first phase of its investigation to see if the tie up could lead to higher prices or poorer service for the country's consumers.

On April 30, U.S. retailer Walmart Inc. (WMT) said it will sell its U.K. arm, Asda, to rival Sainsbury in a deal worth 7.30 billion pounds ($9.4 billion). If the merger is approved it would create the largest supermarket group in the U.K.

The CMA said its investigation will consider whether the merger could lead to less choice, and consequently higher prices or poorer services for customers, across the range of products sold by both companies. In addition to groceries, Asda and Sainsbury sell electricals, toys, clothing and fuel.

The investigation will also examine whether the new enlarged company could use its increased buying power to squeeze suppliers and if this could have repercussions for consumers, the CMA said.

Sainsbury and Asda have both asked the CMA to move more quickly to the in-depth second phase of the inquiry through a "fast-track" process and the regulator said that it expects to accept this request unless it receives any objections.

The CMA is inviting views by Aug. 31 on how the merger could affect competition.

On Wednesday, the Times of London reported that Martin Walker, U.K. equities fund manager at Invesco Perpetual, Sainsbury's third-largest shareholder, has backed the proposed merger as it will help the company compete with rival Tesco PLC (TSCO.LN).

Write to Maryam Cockar at maryam.cockar@dowjones.com

(END) Dow Jones Newswires

August 23, 2018 07:35 ET (11:35 GMT)

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