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Major Sainsbury's Shareholder Approves Asda Merger

Published on Aug 23 2018 12:05 PM in Retail tagged: Sainsburys / UK / Merger / Asda / Invesco Perpetual / Shareholder

Major Sainsbury's Shareholder Approves Asda Merger

A major shareholder of Sainsbury's has declared its public support for the group's planned £12 billion merger with Asda.

The Times reported Martin Walker, UK equities fund manager at Invesco Perpetual, as saying that the proposed merger offered "huge" financial benefits.

“There are some real positives here in this deal and when I appraise it financially the earnings accretion are huge,” Walker told the paper.

“The synergy costs are conservative and could be much bigger, but what I am most interested in is that the deal would appear to offer returns in excess of Sainsbury’s cost of capital.”

No Negatives

Walker also dismissed the possible negative effects of the merger, noting that Sainsbury's CEO Mike Coupe is "putting his job and reputation on the line" to ensure the deal goes through, and therefore there is little reason to suspect it won't happen.

“The buying synergies are merely from harmonising the buying book with suppliers and not pushing down on suppliers and I am struggling to see what the problem is with that," he said.

In June, the UK's Competition and Markets Authority said that it had received submissions from retailers, suppliers and industry representatives about the planned merger, with some highlighting competition concerns.

Concerns were also raised about the increased buying power of the merged entity, which would give it the ability to 'negotiate lower prices with suppliers and/or to pass on excessive risks and unexpected or disproportionate costs to suppliers', the CMA said.

© 2018 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine

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