New research has suggested that at least 73 supermarkets will have to be sold for the Sainsbury’s (LON: SBRY) and Asda merger to get the go-ahead.
The £15 billion deal was announced in April, where Sainsbury’s boss Mike Coupe reassured employees that the merger would not result in store closures or job cuts.
The proposed deal is set to face intense scrutiny from the Competition and Markets Authority (CMA), who ensure the combined group will not become too dominant or harm consumers.
David Haywood, the founder of Maximise UK, a consultancy group that identifies profitable new locations for retailers, said that at least six percent of stores may need to close.
“There hasn’t been a retail deal like this in more than a decade. The real focus will be on how Sainsbury’s and Asda’s main supermarkets operate at a local level and how they overlap,” he told the BBC.
The CMA will be concerned about whether the deal reduces the number of competing brands within a 10 or 15 minute drive time.”
The calculation has been based on whether the CMA includes discounters Aldi and Lidl as competitors. If they have been excluded, Sainsbury’s and Asda may have to close as many as 245 stores.
“For me, this is the real issue regarding these overlapping catchment areas,” added Haywood.
“Considering that 66 percent of the stores caught in the overlap analysis have selling areas over 20,000 square feet, the key issue is who can actually acquire store locations of this size. They’re typically too big for an Aldi or a Lidl.”
The CMA has previously included Aldi and Lidl in some calculations but with a lower weighting.
The results of the CMA investigation would take as long as a year.