J Sainsbury PLC’s (LON:SBRY) proposed merger with Walmart Inc's (NYSE:WMT) Asda should be blocked by the UK competition watchdog, a former executive of Asda has said.
John Maltman, who served as business development director at Asda in 2004 and 2005, said the deal would impact jobs in warehousing, distribution, stores, headquarters and suppliers.
He said the companies were treating people as “fools” by saying there would be no store closures as a result of the merger.
READ: Sainsbury's confirms £15bn Asda merger and dismisses reports stores will close
“It is a great pity that the management of two big corporations cannot come up with a better and more constructive idea than a merger,” he said.
“In my view, putting two low growth businesses together doesn’t create a high growth business.”
Asda and Sainsbury’s have decided to have the deal fast-tracked into a phase 2 investigation by the Competition and Markets Authority.
CMA expected to wave through merger after approving Tesco-Booker deal
Many analysts expect the tie-up will be approved after the CMA waved through Tesco PLC’s (LON:TSCO) acquisition of wholesaler Booker.
Maltman, who is now chief executive of e-commerce start-up E Fundamentals, said unfortunately the argument that “we let the Tesco/Booker merger happen, so we cannot stop this” may prevail.
By combining forces, Asda and Sainsbury’s hope to strengthen their position against tough competition facing supermarkets from the likes of Amazon.com Inc (NASDAQ:AMZN) and discounters Aldi and Lidl.
“It wasn’t so long ago that retailer margins in the UK were amongst the highest in the world,” Maltman said.
“Creating a duopoly with anything like 60% of grocery sales and expecting it to work for customers is wishful thinking.
Asda and Sainsbury's 'are acquisition targets'
He added that management of the two businesses “should get on with creating real growth” since they are both likely acquisition targets.
READ: Sainsbury's and Asda lose market share as sales trail behind 'big four' rivals, Kantar reveals
The latest data from Kantar Worldpanel showed the two companies lost market share and delivered the slowest sales growth out of the so-called 'big four' supermarkets in the 12 weeks to April 22.