Sainsbury’s and rival Morrisons engaged in exploratory negotiations earlier this year regarding a potential multibillion-pound merger. This proposed tie-up would have represented the most significant transformation in the British supermarket sector in decades, though it is understood that the companies are no longer in active discussions. According to the Financial Times and Sky, the two companies held exploratory negotiations. It is believed they are no longer in live discussions.
Morrisons, previously part of the traditional “big four” UK grocers alongside Tesco, Asda, and Sainsbury’s, was acquired by US private equity firm Clayton Dubilier & Rice in 2021. Reports suggest that the investment firm remains open to a potential combination between Morrisons and another major supermarket, with speculation even linking Asda—majority-owned by TDR Capital—to similar industry talks.
Data from Worldpanel by Numerator indicates that a successful merger between Sainsbury’s and Morrisons would have resulted in a combined 23.6% market share. While substantial, this figure would still trail Britain’s largest retailer, Tesco, which maintains a 27.8% share of the market.
Any such deal would almost certainly face rigorous scrutiny from the Competition and Markets Authority. Regulators previously blocked a £7bn merger attempt between Sainsbury’s and Asda in 2019, citing concerns over reduced competition and the potential for increased prices for consumers. Consequently, any new effort would likely require the divestment of numerous store locations to secure official approval. When Asda and Sainsbury’s almost joined forces, the last attempt to merge two of the big four supermarkets was in 2019.
Politically, the grocery sector remains sensitive due to the recent impact of persistent food inflation on household budgets. For Sainsbury’s, the current focus appears to be on its core food business; the company recently offloaded Argos for £120m, a significant move given it purchased the chain for over £1bn a decade ago.
Sainsbury’s, the UK’s second-largest grocer with a 15.2% market share and approximately 140,000 employees, has seen its stock value dip 3% so far this year. In contrast, shares of its FTSE 100 competitor Tesco have risen by 6% during the same period.
The revelation of these talks coincides with robust growth from budget rivals. Lidl GB reported on Monday that its annual revenue surged 10% to exceed £13bn. Furthermore, the retailer noted that pre-tax profits at its British arm grew by 30% to £245.5m for the year ending in February, driven by increased demand for its upmarket Deluxe range and affordable fresh produce.
Representatives for both Sainsbury’s and Morrisons declined to provide comments on the reports regarding the potential merger.
