Sainsbury’s and Morrisons Held Merger Talks, Sky News Reports

Sainsbury’s and Morrisons held exploratory merger talks earlier this year, according to Sky News. Industry sources expect more grocery deals within three years, and a combined group would still trail Tesco on market share.

Sainsbury’s and Morrisons held preliminary talks about a merger earlier this year, Sky News reported on Monday. The discussions are not currently active, according to the story by Sky News City editor Mark Kleinman.

Sainsbury’s is listed in London, while Morrisons is owned by private equity firm Clayton Dubilier & Rice. A deal would have been the most significant tie-up in the sector for more than five years, Sky News said.

Industry sources told Sky News they believe another wave of consolidation is inevitable within the next three years. Retail insiders said on Monday that Clayton Dubilier & Rice would remain open to a tie-up with one of its major rivals.

Analysts also expect Asda, which like Morrisons is owned by private equity investors, to be active in any fresh round of dealmaking.

The last attempt to merge two of the UK’s big four supermarkets came in 2020, when Asda and Sainsbury’s came close to combining. Competition regulators blocked the deal.

Retailers believe the landscape has shifted since then, with Aldi and Lidl growing into formidable discount competitors. In their view, a deal between two of Asda, Morrisons and Sainsbury’s would now be far likelier to win approval.

Recent Kantar market share data suggests a combined Sainsbury’s and Morrisons would hold 23.8% of the market. That is well short of Tesco’s 28.2%.

Cost pressure also runs through the story. Food security and rising costs have become more pressing for the industry, as grocers try to rein in their own costs to keep prices competitive.