Jobs cuts inevitable after supermarkets merger, claim experts
The fate of thousands of supermarket jobs has been thrown into doubt after details of Sainsbury's shock Â£12billion merger with Asda emerged.
Bosses at the grocery giants initially insisted no stores would close as a result of the deal, but later said regulatory authorities could force them to offload stores as part of a competition probe.
Sainsbury’s has estimated a range of stores could be sold as part of its modelling ahead of the deal.
This estimate, based on possible outcomes from the Competition and Markets Authority investigation, has been used by bosses to calculate that £500million in cost savings will be produced when the companies merge.
While an exact number of store closures was not divulged by the chains, numbers crunched by research firm GlobalData show that “at least” 75 stores where Sainsbury’s and Asda overlap are at risk.
Patrick O’Brien, UK retail research director at GlobalData, said: “Regulators will be looking to see how many Asda stores are in close proximity to Sainsbury’s stores.
“Seventy-five Asda stores have a Sainsbury’s (excluding Locals) in the same sector. We think these 75 stores would be the absolute minimum that the CMA will want disposed of.”
Sainsbury’s insists that any stores it offloads will be done so as “trading entities”, but the future of staff at those outlets – which number anywhere from 7,500 to 10,000 – will depend on whether a buyer is found and if the the shops are then kept trading. For its part, the CMA said that the merger is “likely to be subject to review”, adding that it will assess whether the deal could reduce competition and choice for shoppers.
But Mr O’Brien added: “It is very important to them (Sainsbury’s and Asda) to keep their hands clean because when the job cuts come, and they eventually will, they will be able to pin it on the CMA.”
Details of the deal came after the companies – the UK’s number two and three supermarkets – confirmed on Monday morning that the deal will create a retail titan with a bigger share of the market than Tesco.
It would have combined revenues of £51billion and boast a network of 2,800 Sainsbury’s, Asda and Argos stores. It will see Asda owner Walmart hold 42 per cent of the new business and receive £2.97billion in cash, valuing Asda at £7.3billion.
However, Walmart will also book a two billion US dollar non-cash loss on the deal.
Sainsbury’s is valued at around £5.9billion.
The combined supermarket expects to lower prices by around 10% on products customers buy regularly.
Sainsbury’s boss Mike Coupe said: “This is a transformational opportunity to create a new force in UK retail, which will be more competitive and give customers more of what they want now and in the future.
“This creates a great deal for customers, colleagues, suppliers and shareholders and I am excited about the opportunities ahead and what we can achieve together.”
Tim Roache, GMB General Secretary said: “It remains to be seen if this ‘supermarket sweepstake’ is the real deal or a bargain basement ready meal.
“Hundreds of thousands of workers stand to be affected, and all know such announcements tend to be followed by management speak like ‘rationalisation’ in the name of ‘efficiency’.
“What that usually means is job losses or cuts to pay, terms and conditions which would be wholly unacceptable.
“Not least because ASDA workers have already voluntarily agreed to change their contracts to be more flexible in order to play their part and help their employer be more profitable.”
“It is quite right to be asking now in whose interests this proposed merger is being tabled.
“Is it workers and customers or the shareholders and speculators not happy with the hundreds of millions they already make in a year?”