The UK’s competition watchdog has turned down a request from J Sainsbury PLC (LON:SBRY) and Walmart Inc's (NYSE:WMT) Asda for more time in a phase two investigation of a proposed merger of the two supermarket groups.
The supermarkets lodged an application with the Competition Appeal Tribunal asking for a review of the timetable and process of the Competition and Markets Authority’s (CMA) probe into the deal.
Sainsbury’s argued that the current timetable did not give the companies or the CMA enough time to provide and consider all the evidence, given the “unprecedented scale and complexity” of the case.
The companies asked the CMA for an additional 11 working days over the Christmas period to respond to “a large amount of material recently provided to us”.
More time would put investigation at risk, says CMA
The CMA has rejected the application, saying: “If we gave the companies the extra time they are now asking for, it would put our ability to complete the investigation by the required deadline at very serious risk."
It added: "As with all of our merger reviews, we construct our timetable to ensure that everyone has the chance to have their say, including customers, the companies involved and suppliers."
The CMA is looking at whether shoppers would face higher prices or a lower quality of service as a result of the merger.
The regulator said investigating any merger of this size requires assessing a large volume of material in a short timeframe and it was not unusual for the companies involved to do this in the timelines it has given Sainsbury’s and Asda.
“We have done everything we can to aid their consideration of this work, whilst still ensuring we are able to meet our legally-binding deadline. This includes extending certain administration timelines where appropriate.”
Shares in Sainsbury's fell 4.4% to 283p in morning trading.
Sainsbury's may be better off alone, analyst suggests
Ahead of the CMA’s decision, AJ investment director Russ Mould said investors may begin to question Sainsbury’s management more strongly on the merits of pushing ahead with the tie-up, given the demands it places on the company's time and resources.
"If the CMA rules against the deal then it is fair to say their credibility will be in tatters," he said.
Mould added: “Scale is important in the groceries sector but given the structural challenges faced by the industry, size certainly isn’t everything. Maybe Sainsbury’s would be better off staying smaller but getting smarter in the way it responds to the needs of shoppers.”