Sainsbury Considers Buying Asda From Walmart

U.K. grocer J Sainsbury Plc is considering a purchase of rival Asda from Walmart Inc., in what could be a multibillion-pound deal creating Britain’s biggest supermarket operator, according to a person familiar with the situation.

The companies have held preliminary discussions and could announce an agreement in the coming weeks, said the people, who asked not to be identified because deliberations are private. No final agreement has been reached and talks could still fall apart, they said.

A combination of Sainsbury, the U.K.’s second-largest grocer, with No. 3 Asda would push the combined company past Tesco Plc. Each company has just under 16 percent of the U.K.’s grocery business, according to Kantar Worldpanel, so a combined entity would have a nearly one-third share, compared with Tesco’s 28 percent.

Representatives for Sainsbury, Walmart and Asda could not immediately be reached for comment.

The talks come at a time when the country’s retailers are under a growing threat from Amazon.com Inc. Supermarket operators have been cutting thousands of jobs in response to a pricing squeeze exacerbated by the Brexit-induced weakness of the pound. Combining the two companies would give them greater leverage with suppliers -- something Tesco has used to keep a lid on its sourcing costs.

Walmart acquired Asda for 6.7 billion pounds ($6.7 billion) in 1999. The U.K. grocer, which was known for its low prices, has struggled since then amid the rise of German discounters Lidl Ltd. and Aldi Stores Ltd., which have undercut Asda on its biggest selling point.

London-based Sainsbury, with a market valuation of 5.9 billion pounds, expanded into selling household goods via its 1.4 billion-pound purchase of Argos in 2016. The Qatar Investment Authority is the company’s largest shareholder, with a 22 percent stake.

— With assistance by Dinesh Nair, Aaron Kirchfeld, Ed Hammond, and Manuel Baigorri

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