Sainsbury's and Asda merger talks at an "advanced" stage

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United Kingdom supermarket chain Sainsbury's has confirmed it is in advanced discussions about a £10 billion merger with competitor Asda.

The tie-up would create a grocery behemoth with more than 1,200 supermarkets, almost £50bn in annual sales and 355,000 employees across Britain.

A market research group, Kantar Worldpanel, said earlier in April that Tesco's year-on-year sales growth was tabbed at 2.4%, well ahead of the 1.8% rate for Asda and more than triple the 0.6% pace for Sainsbury's in the 12 weeks ending in March.

Britain's supermarket chain Sainsbury said Saturday it was in talks to merge with rival Asda, in a deal that would create a retail giant with around 30 percent share of the British market.

It was unclear this weekend how a deal would be structured, although one insider said Wal-Mart was likely to reverse Asda into Sainsbury's while taking a stake in the combined group.

One proponent of the tie-up suggested that the CMA's decision to wave through Tesco's recent £3.7bn takeover of Booker, the wholesaler, had ‎given a green light for others to explore industry-reshaping mergers.

"It's hard to believe it would not require considerable store disposals and there aren't many buyers out there". "There will have to be a proper competition inquiry", said Vince Cable, the Liberal Democrat leader.

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The deal, which would mark the biggest shakeup in food retailing in more than a decade, comes as traditional supermarkets are under pressure from German discounters Aldi and Lidl.

In an interview with the BBC, Richard Lim, from economics research consultancy Retail Economics, said the merger would be a "game changer in the United Kingdom grocery market of epic proportions".

The deal would be the largest in the United Kingdom supermarket sector since Morrisons acquired the Safeway business in 2004.

The shares of Sainsbury had closed at 269.8 pence each in London trading a Friday after rising 0.45% on the session, an active move that would take its year-to-date gain to 11.95%.

Roger Burnley, who took over as Asda CEO in January, is a former Sainsbury's executive, working under Coupe.

One source close to Wal-Mart said the merger would allow the two companies to invest in providing more products at lower prices.

A major uncertainty surrounding any combination would be whether the move secures approval from Britain's competition regulator, the Competition and Markets Authority (CMA), given that the deal would effectively create a duopoly. Asda did not respond to requests for comment.

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