May 18, 2018 / 6:33 AM / a year ago

UK competition regulator seeks views on Sainsbury's/Asda deal

LONDON (Reuters) - Britain’s competition regulator has invited all interested parties to submit their views on a proposed 7.3 billion pound ($9.9 billion) deal to combine Sainsbury’s (SBRY.L) with Walmart’s (WMT.N) Asda supermarket chain.

FILE PHOTO: People walk past branches of ASDA and Sainsbury's in Stockport, Britain April 30, 2018. REUTERS/Phil Noble/File Photo

The Competition and Markets Authority (CMA) said the preliminary “invitation to comment” was the first part of its information-gathering process, in advance of a formal investigation starting.

Interested parties have until June 4 to respond.

The CMA said it was also likely to proactively contact companies and organizations that are active in the markets affected by the deal, such as suppliers, competitors, industry bodies and consumer organizations.

The CMA’s move came as it emerged that business minister Greg Clark had written to the regulator asking that its probe consider the implications of the deal for supermarket suppliers.

“My view is that, when assessing this merger, it should take account of both the horizontal and vertical competition issues, including the possible impact on the supply chain,” Clark said in a letter to CMA CEO Andrea Coscelli.

The cash and shares deal would see Sainsbury’s combine with Asda to overtake Tesco (TSCO.L) as Britain’s biggest supermarket group.

The combined group is seeking synergies of at least 500 million pounds, 350 million pounds of which would come from savings when buying from suppliers.

The CMA’s remit is to ascertain whether merger situations could result in a substantial lessening of competition. It is independent of government when making decisions on mergers.

Last year’s surprise decision by the CMA to unconditionally clear Tesco’s 4 billion pounds purchase of wholesaler Booker has encouraged Sainsbury’s and Asda to believe they can get a viable transaction through. They want the CMA to fast track to a “phase 2” examination so that the deal can be completed in the second half of 2019.

Competition lawyers say Sainsbury’s and Asda face an uphill battle to get the bid passed by the CMA without having to sell off so many stores that it removes the rationale for the deal.

Sainsbury’s and Asda have expressed confidence the CMA will not insist on mass store disposals but have declined to say how many would make the deal unattractive.

However, a source with knowledge of the situation told Reuters a figure “into the hundreds” would likely kill the deal.

Reporting by James Davey; Editing by Sarah Young/Keith Weir

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