The boss of J Sainsbury plc (LON:SBRY) has warned that regulators could force Britain’s second-largest supermarket to pull out of its proposed £12bn merger with rival Asda.
Last month, the Competition and Markets Authority kicked off a formal investigation into the merger amid concerns over the potential for higher prices and worse quality of service. Both Sainsbury’s and Asda have asked the CMA to fast-track the investigation into the more in-depth phase 2 stage, something which could be announced as early as this week.
READ: CMA kicks off formal probe into Sainsbury's-Asda merger
Sainsbury’s chief executive Mike Coupe has said there are some “extreme scenarios” where the remedies demanded by regulators might render any deal pointless.
“There is an Ebitda [earnings before interest, tax, depreciation and amortisation] threshold at which point either party has the right to walk away,” he told the Financial Times. “It’s not a number of stores, it’s a level of profitability.”
Despite the intense scrutiny that the companies are likely to come under, Coupe remains confident that the deal will go through.
“We wouldn’t be doing it unless we thought we stood a pretty good chance of getting it through.”
Sainsbury’s shares were up 0.1% to 319.3p in mid-morning trade on Monday.