(Bloomberg) -- The success of the megamerger of J Sainsbury Plc and Walmart Inc.’s Asda hinges on how many grocery stores the Competition and Markets Authority forces the combined group to shed.
Asda’s known as being concentrated in the north of the U.K., but a look at a map of the location of all of its and Sainsbury’s stores shows that it isn’t a slouch in the south, either. It means that it’s not so easy to jump to the conclusion that the current distribution will sail through roughly unchanged, leaving Asda to own the north – the branding of the stores won’t change after the merger – and Sainsbury the south.
The number of stores that could be subject to close regulatory scrutiny by the CMA looks substantial. In past supermarket deals, the regulator has used driving times, ranging from around 5 minutes to 15 minutes, to identify areas where companies attempting to merge may need to dispose of stores in order to maintain competition in the grocery market.
Gadfly has assessed this in terms of miles. Asda has about 630 stores in England, Wales and Scotland, and of these, there are 526 where the closest Sainsbury is within 5 miles or less.
While Asda only has larger shops, Sainsbury has several formats, and more than half are convenience shops. Gadfly’s analysis doesn’t distinguish between these. It’s not yet clear how the regulator will account for these differences in judging how many disposals it will require to approve the deal.
Officials may not let both grocers have their way without putting them on a serious diet.
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