Plans to create Britain’s largest food retailer by merging Asda and Sainsbury’s were blocked Thursday by regulators on grounds it would have led to higher prices and less choice for consumers (Oli SCARFF)

London (AFP) – A mega-merger of British supermarkets Asda and Sainsbury’s collapsed on Thursday after regulators blocked the deal on the grounds it would spark higher prices and damage competition.

The Competition and Markets Authority (CMA), revealing its verdict in a final report, prompted Walmart-owned Asda and London-listed Sainsbury’s to scrap the proposed deal.

“The CMA has blocked the Sainsbury’s-Asda merger after finding it would lead to increased prices in stores, online and at many petrol stations across the UK,” the regulator concluded in a statement that echoed its preliminary findings.

The deal floundered one year after Asda and Sainsbury’s — the nation’s second and third biggest supermarket chains — unveiled merger plans that would have created a retail king to leapfrog UK number one Tesco.

The watchdog added that the transaction — effectively a takeover bid with Sainsbury’s acquiring a majority 58-percent stake in the combined group and Walmart the rest — would have resulted in a “substantial lessening of competition”.

“The Competition and Markets Authority found that UK shoppers and motorists would be worse off if Sainsbury’s and Asda — two of the country’s largest supermarkets — were to merge,” it continued.

“This is due to expected price rises, reductions in the quality and range of products available, or a poorer overall shopping experience.”

Stuart McIntosh, chairman of the CMA inquiry group, added that they “concluded that there is no effective way of addressing our concerns”.

Asda and Sainsbury’s swiftly announced that they have “mutually agreed to terminate the transaction”.

Sainsbury’s chief executive Mike Coupe argued in a statement that the merger had sought to “lower prices for consumers”, adding the CMA had ignored “the dynamic and highly competitive nature of the UK grocery market”.

Asda CEO Roger Burnley said that it was “disappointed” by the decision, insisting that the deal would have “delivered great benefits for customers”.

– No supermarket sweep –

Analysts said that Sainsbury’s ambitious plans to dominate the fiercely competitive supermarket sector had been left in tatters. 

“What was meant to be a supermarket sweep turned into a clean-up in aisle three for Sainsbury’s, the firm’s sector-dominating ambitions dealt a fatal blow by the CMA,” noted Spreadex analyst Connor Campbell.

“What the company does next, especially in relation to CEO Mike Coupe, is going to be very interesting.”

Thursday’s news sent shares in Sainsbury’s sliding 5.34 percent to 214.50 pence in late morning deals on London’s FTSE 100 benchmark index, which was 0.3 percent lower overall.

In a controversial twist after the deal announcement one year ago, Coupe was forced to apologise after he was caught on camera between media interviews singing “We’re in the Money”.

“Today, you’re more likely to hear Bonnie Tyler blasting down the aisles of Sainsbury’s supermarkets,” mused investment director Russ Mould at stockbroker AJ Bell.

“Coupe is holding out for a hero: they’ve got to be strong and they’ve got to be fast, otherwise Sainsbury’s problems will just get worse.”

Long-established UK retailers are battling sliding consumer sentiment and Brexit uncertainty alongside a broader economic slowdown.

The sector also faces fierce competition from the likes of online US titan Amazon — and German-owned discounters Aldi and Lidl.

Disclaimer: Validity of the above story is for 7 Days from original date of publishing. Source: AFP.