Analysts have again suggested that Sainsbury’s is facing a major shake-up under its new chairman should its plan to merge with Asda be blocked by the regulator.
With the Competition and Markets Authority (CMA) due to publish its final decision on the deal by the end of this month, analysts at investment bank Jefferies are quoted on the This is Money website as saying that there is just a 20% chance of the tie-up being waved through.
James Grzinic, equity analyst at Jefferies, adds that a definitive CMA block would “supply the catalyst for any potential private equity interest for Asda to materialise swiftly.”
Last month, Martin Scicluna became the new Chairman of Sainsbury’s, replacing David Tyler who announced in 2018 that he would be stepping down. It has previously been suggested that the first major move by Scicluna will be a shake of Sainsbury’s top management team, with Chief Executive Mike Coupe possibly being replaced. He masterminded the merger plan after nearly two years of secret talks with Asda’s management and owner Walmart.
In the report by Jefferies, Grzinic outlines that Scicluna is likely to preside over wider changes at the retailer should the tie-up fail. “In particular, the risk of a reinvigorated Tesco continuing to recover customers historically lost to Sainsbury’s would need addressing with urgency,” he said.
Sainsbury’s has been outperformed by its main rivals over the last year, with the chain receiving public criticism for poor store standards and product availability. Investors are said to be pushing for the retailer’s management to cut their losses and walk away from the Asda deal so they can focus their efforts on improving the performance of the core business.
NAM Implications:
- A private equity move for Asda would have a precedent in Walmart Brazil.
- i.e. sell-off of 60% to retain an interest but not maintain a full presence in the market…
- …all part of a global policy by Walmart to this effect in key overseas markets.
- A major, top-level shake-up is part of the price of participation in high-stakes games…
