Sainsbury’s held early-stage talks with smaller rival Morrisons earlier this year over a potential merger, according to reports. Britain’s second-biggest grocery chain is understood to have started preliminary discussions in November last year over a possible multibillion-pound deal before walking away in February.
Talks not active
The pair are not believed to be in active talks over any tie-up, but the news reignites speculation over consolidation in the sector as competition ramps up with discounters Aldi and Lidl continuing to expand and pricing in sharp focus amid soaring inflation.
Sainsbury’s and Morrisons declined to comment.
Regulatory scrutiny likely
Any such deal would mark the biggest in the sector for many years, with the last attempt – Sainsbury’s £7 billion bid to buy Asda – blocked by the competition watchdog in 2019. A deal between Sainsbury’s and Morrisons would be closely scrutinised by the Competition and Markets Authority (CMA) and would likely see Sainsbury’s forced to offload sites, given their positions in the market.
Sainsbury’s is the second-largest chain with a 15.2% market share while Morrisons is fifth in the sector with an 8.4% share, according to the latest industry data from Worldpanel. Morrisons – previously the fourth-biggest player – was overtaken by Aldi in 2022.
Morrisons’ turnaround
Bradford-based Morrisons has been embarking on a turnaround after struggling with trading and having 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.
It has been cutting costs, delivering around £53 million more in savings over the quarter to July 26 to take total savings to almost £1 billion since first launching the overhaul. The group’s most recent annual results showed it shed almost 5,000 jobs for the year to October last year.
