Sainsbury’s in merger talks with supermarket giant rival

Sainsbury’s and Morrisons have held talks over a possible merger, according to reports.

The discussions were at an early stage and began in November last year, with Sainsbury’s walking away in February.

The potential deal would have been worth multiple billions of pounds.

The two supermarket groups are not believed to be in active talks over any tie-up.

But the reported contact has reignited speculation over consolidation in the grocery sector.

Competition has been ramping up, with discounters Aldi and Lidl continuing to expand.

Pricing has also been in sharp focus amid soaring inflation.

Sainsbury’s and Morrisons declined to comment.

Any such deal would mark the biggest in the sector for many years.

The last attempt at a merger on that scale saw Sainsbury’s launch a £7 billion bid for Asda.

That deal was blocked by the competition watchdog in 2019.

A combination of Sainsbury’s and Morrisons would be closely scrutinised by the Competition and Markets Authority (CMA).

Given their positions in the market, Sainsbury’s would likely be forced to offload sites.

Sainsbury’s is Britain’s second-biggest grocery chain, with a 15.2% market share, according to the latest industry data from Worldpanel.

Morrisons is fifth in the sector, with an 8.4% share.

Morrisons was previously the fourth-biggest player in the market.

It was overtaken by Aldi in 2022.

The Bradford-based group has been embarking on a turnaround after struggling with trading.

It has also been laden with debts since its private equity takeover by US firm Clayton, Dubilier & Rice in 2021.

Morrisons revealed its debts had swelled to £7.52 billion in the year to October last year.

Meanwhile, Tesco is expected to reveal accelerating growth in recent months after a “soft” start to the year, according to analysts.

The supermarket giant has strengthened in recent years under the leadership of Ken Murphy, pushing the group’s share of the UK grocery market close to its strongest level for a decade.

Latest data from Worldpanel, released last month, indicated that Tesco holds a 28.1% share of the grocery market, surpassing its two largest rivals, Sainsbury’s and Asda, combined.

However, investors will hopeful that the company points to a more positive trajectory for the rest of this year in its half-year update on October 8 after slower growth in the first quarter.

In June, the group reported weaker-than-expected sales growth, at 1%, for the three months to end of May.

Bosses said sentiment among shoppers had been impacted by the situation in the Middle East, although it had not yet seen price inflation linked to the conflict.