UK supermarket giants clinch $18b merger deal

LONDON, Apr 30 (AFP): Britain's second and third biggest supermarket chains Sainsbury's and Walmart-owned Asda have agreed to merge, the pair said Monday, creating a 13-billion pound ($18-billion, 15-billion-euro) retail king that would leapfrog Tesco.

The blockbuster deal comes as the UK retail sector faces squeezed profit margins due to fierce competition from German-owned discounters Aldi and Lidl as well as online players like US titan Amazon.

The news sent Sainsbury's share price spiking more than 20 percent in initial deals on the London stock market, while Tesco sank almost four percent on fears the group could lose its retail crown.

"Sainsbury's and Walmart Inc. are pleased to announce that they have agreed terms in relation to a proposed combination of Sainsbury's and Asda

Group Limited, a wholly owned subsidiary of Walmart, to create an enlarged business," they said in a statement after confirming advanced talks over the weekend.

The transaction values Asda at o7.3 billion. Sainsbury's stock market capitalisation stood at o5.9 billion at the close of business on Friday. Walmart will own 42 per cent of the combined business and receive o2.97 billion in cash, while Sainsbury's will hold a majority stake.

"This is a transformational opportunity to create a new force in UK retail, which will be more competitive and give customers more of what they want now and in the future," said Mike Coupe, chief executive at Sainsbury's.

The deal still remains subject to approval from Britain's Competition and Markets Authority (CMA) regulator, amid concerns over the impact on consumer choice and jobs.