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Suppliers could be squeezed by Asda Sainsbury's merger

Suppliers could be squeezed by Asda Sainsbury's merger

Suppliers could be squeezed by Asda Sainsbury's merger

Sainsbury's has agreed to buy Walmart's United Kingdom unit, Asda, for 7.3 billion pounds ($10.1 billion) in cash and stock in a deal that would create Britain's largest supermarket chain and marks a profound shift in the country's grocery market.

The new group, which will have a combined market share of 31.4 percent, will be better placed to see off competition from German discount supermarket chains Aldi and Lidl, as well as USA online retailer Amazon, Sainsbury's said.

The stance of the Competition and Markets Authority will be critical to the viability of this deal.

Charles Newsome, division director at Investec Wealth and Investment, was quick to halt praise for the Asda Sainsbury's deal and claimed the agreement might not be the "right thing" for Sainsbury's.

Shares in Sainsbury's jumped 20 percent to 325 pence at the market open.

The cash and stock deal will also reshape Britain's supermarket industry.

Sainsbury and Asda announced a 13.3 billion pound ($18.33 billion) deal that will create Britain's biggest supermarket group by market share, surpassing Tesco.

If coupled with Asda's successful George clothing line, the combined business could stand as a competitor to the likes of United Kingdom value clothing retailers such as Primark.

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Sainsbury's CEO Mike Coupe said he was "100 percent confident" that no stores would be closed because of the deal.

"This was an unguarded moment trying to compose myself before a TV interview", he said to ITV.

"It was an unfortunate choice of song from the musical '42nd Street, ' which I saw past year, and I apologise if I have offended anyone", Coupe said in the statement.

However Ms Reeves said: "I think that people working at head office in Asda will be incredibly concerned about their future". "That value part of the market, the likes of Primark, has got a strong foothold; that's a significant part of the market that's growing, and so by creating these synergies within a business, being able to have greater buying power with their suppliers, essentially that will put them in a better and more competitive point of the market for the clothing business as well".

"We believe by bringing these businesses together, we can lower poses and offer better ranges for our customers as well as making sure that we do a great job of creating opportunities for our colleagues in both businesses". We will not close any stories as a result of this transaction.

Sainsbury's said the deal would result in customer benefits including a 10% reduction in the price of numerous products that customers buy regularly.

After the merger, the group will have a joint 2,800 stores, £51bn combined revenues and a 59% share of the total United Kingdom retail market - with Tesco's 27.6% and Morrison's 10.4% market shares, the top three supermarket groups (no longer four) would account for almost 70% of the total market.

Sainsbury's chief executive Mike Coupe will retain that position in the merged company, which will keep the Sainsbury's and Asda brands.

In March, Tesco completed the purchase of wholesaler Booker - Britain's biggest cash-and-carry operator - for £3.7 billion.

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