Concerns raised about ASDA and Sainsbury merger
The competition regulator has dealt a potentially fatal blow to Sainsbury's planned takeover of Walmart's Asda.
It said it was unlikely the companies would be able to address its "extensive" concerns about the deal.
Shares in Sainsbury's plunged as much as 16 percent on Wednesday after the Competition and Markets Authority (CMA) said its provisional view was the deal should be blocked or require the sale of a large number of stores, or even one of the brands.
"Close to the worst possible outcome (for the companies)," said Bernstein analyst Bruno Monteyne.
Sainsbury's, Britain's second-biggest supermarket group, and number three Asda agreed the deal last April, aiming to overtake market leader Tesco. They hope their combined buying power would help them better compete with fast-growing discounters Aldi and Lidl, an enlarged Tesco after its purchase of wholesaler Booker and online retailers like Amazon.
The deal, which would create a company with annual revenue of about 51 billion pounds ($66 billion), more than 2,800 stores and a grocery market share of 31.2 percent, also gave the world's biggest retailer Walmart a way to exit the British market, one of the weakest performers in its portfolio.
But the CMA said it had "extensive" concerns about the plan as it could lead to a worse experience for in-store and online shoppers through higher prices, a poorer shopping experience and reductions in the range and quality of products offered.
It was "likely to be difficult for the companies to address" those concerns, it said, adding it was also worried prices could rise at a large number of Sainsbury's andAsda petrol stations.
Sainsbury's said it fundamentally disagreed with the findings. "We will fight right the way through the process," its chief executive Mike Coupe said
Published: by Radio NewsHub