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£12bn Sainsbury’s-Asda merger referred for more in-depth phase 2 investigation

Published: 08:52 19 Sep 2018 BST

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The CMA has set a deadline of March 5 to complete this part of the probe

As expected, the proposed £12bn merger between J Sainsbury plc (LON:SBRY) and Asda has been referred to a more in-depth phase 2 investigation by the Competition and Markets Authority.

At the end of August, the watchdog kicked off its phase 1 probe to assess whether the deal could lead to higher prices, less choice or reduced quality services for shoppers.

Both supermarkets asked the CMA to fast-track the investigation to phase II, which it has now done.

READ: Sainsbury’s boss warns regulators could scupper £12bn merger

“The CMA has now confirmed, through its phase 1 investigation, that the deal raises sufficient concerns to be referred for a more in-depth review,” read the statement.

“The companies are two of the largest grocery retailers in the UK and their stores overlap in hundreds of local areas, where shoppers could face higher prices or a worse quality of service.”

With most mergers, a full phase 1 investigation is needed to determine whether a deal can be cleared or whether further scrutiny is required.

In a case where it is clear from an early stage that the deal needs an in-depth investigation, such as the Sainsbury’s-Asda tie-up, the companies involved can ask the CMA to move more quickly to phase II. In this latest stage, the original concerns will still be addressed, albeit in more detail.

The CMA has set a deadline of March 5 to complete this stage of the investigation.

The deal announced back in April is set to create the UK’s biggest retail chain which would command an estimated 31.4% of the grocery market.

Researchers reckon the CMA could recommend the enlarged group sells off around 75 of its combined stores. Other analysts have put that figure closer to 300.

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