Walmart's Asda is merging with UK supermarket chain Sainsbury's (WMT)

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May 1, 2018 3:23 PM

Asda, which was previously owned entirely by Walmart, is merging with another UK supermarket chain, Sainsbury’s, according to TechCrunch. Walmart will hold a 42% share in the combined company, and will receive £2.975 billion ($4.1 billion) in cash, giving Asda a £7.3 billion ($10 billion) valuation.

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Asda, which was previously owned entirely by Walmart, is merging with another UK supermarket chain, Sainsbury’s,according toTechCrunch.

Walmart will hold a 42% share in the combined company, and will receive £2.975 billion ($4.1 billion) in cash, giving Asda a valuation of £7.3 billion ($10 billion). The US retailer will also take a noncash loss of approximately $2 billion. The combined company willmaintainboth the Asda and Sainsbury’s brands and operate over 2,800 stores.

The new company will have the leading market share in Britain’s grocery industry.Prior to the merger, Sainsbury’s and Asda were neck and neck for second in the market, with 15.8% and 15.6% share, respectively,according toKantar. But their combined share of 31.4% will overtake market leader Tesco’s 27.6%, putting the new company in a great position to succeed.

The deal will have to contend with antitrust regulation, but that may not be too big of a hurdle since Sainsbury’s is reportedly more prominent in southern England and Asda has more stores in the north,according toCNN Money. Despite Walmart's shrinking control of the business, theplanis for it to be a “strategic partner and long-term shareholder,” though its level of involvement remains to be seen.

Here are a few factors that may have motivated the deal: