Analysts at Citigroup have said that, should a private equity bid for UK supermarket chain Sainsbury’s materialise, Asda, the UK unit of Wal-Mart, could well launch a counter bid.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
“We maintain that the market is overly optimistic about a consortium bid, but if one comes, watch out for a higher offer from Asda,” Citigroup analysts wrote in an investor note yesterday (26 February).
Sainsbury’s has been the subject of bid speculation since the beginning of the month, when private equity firms CVC, KKR and Blackstone confirmed they were considering launching a takeover bid for the UK’s third largest supermarket chain.
Citigroup said that Asda would be able to counter any competition concerns by arguing that market leader Tesco has so many structural advantages that it cannot be caught. Asda could also argue that a private equity acquisition would damage Sainsbury’s, analysts said.
According to Citigroup, the move could see Asda realising GBP1bn (US$1.96bn) in synergies, while allowing the combined entity to offer Sainsbury’s quality and Asda price – thus competing with Tesco on both levels.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalData“The Competition Commission has stated it is worried that Tesco is so big that no competitor can emerge to challenge it. If the Commission fears a monopoly situation, it may settle for a duopoly. With a CC investigation well underway, the timing could not be much better for Asda,” the note read.
When contacted by just-food, Asda downplayed the likelihood of such a move. A spokesperson for the company said that Asda does not comment on market speculation, adding: “We get this kind of speculation all the time.”
