Sainsbury’s and Asda: Is Britain’s Biggest Supermarket ‘What If?’ Back on the Table?

Seven years after regulators stopped Sainsbury’s and Asda creating a £12 billion grocery giant, the prospect of a second attempt is once again stirring speculation across the City.

There is no confirmed deal, and no indication that formal talks are under way. Yet a dramatically altered grocery market, Sainsbury’s renewed focus on food and Asda’s continuing battle to regain lost ground have revived one of British retail’s most intriguing questions: could the merger that failed in 2019 finally become possible?

The timing is significant. Sainsbury’s has agreed to sell Argos to newly established Swift Partners for at least £120 million, almost a decade after acquiring the general merchandise retailer for £1.4 billion.

The transaction, expected to complete in February 2027, is intended to create a simpler business centred firmly on food. Sainsbury’s said the disposal would allow it to direct greater attention, investment and management focus towards its grocery operation.

Chief executive Simon Roberts described the agreement as a further step forward in the retailer’s strategy, saying it would enable Sainsbury’s to focus its resources on the opportunities ahead.

Argos will continue operating online, through its standalone outlets and from stores and collection points inside Sainsbury’s under long-term commercial agreements. Full separation of the two businesses is expected by February 2029.

A very different supermarket battlefield

When the Competition and Markets Authority blocked the original Sainsbury’s-Asda combination in April 2019, it concluded that the deal would reduce competition and risk higher prices, poorer quality and less choice for shoppers.

The proposed merger would have created a business with more than 2,800 stores and annual sales exceeding £50 billion.

Much has changed since then.

Aldi and Lidl have continued to expand, online grocery shopping has become more deeply embedded and Tesco has consolidated its position at the top of the market. Meanwhile, the fortunes of the two former merger partners have diverged.

Sainsbury’s has strengthened its core food operation under Roberts, investing in value, product quality, loyalty pricing and its Nectar programme. The retailer has also simplified its wider business by disposing of financial services operations and now Argos.

Asda, by contrast, has struggled with declining market share and the financial burden created by its debt-funded acquisition in 2021 by TDR Capital and the Issa brothers. The supermarket is working under executive chairman Allan Leighton to improve its performance and rebuild its competitiveness.

Together, Sainsbury’s and Asda would still represent a formidable force in British grocery — and one capable of challenging Tesco’s scale. But that same scale would guarantee intense regulatory scrutiny.

Could the regulator think differently this time?

The decisive question is whether the CMA would now view the grocery market differently.

The regulator’s 2019 objections were extensive, covering supermarkets, convenience stores, online grocery shopping and petrol forecourts. It ultimately rejected suggested remedies and prohibited the merger outright.

However, the competitive landscape is no longer the one examined seven years ago. The discounters command a larger collective presence, consumers shop across more channels and Asda’s market position has weakened substantially.

The Government has also been pressing regulators to support economic growth and reach decisions more quickly. That does not mean a supermarket mega-merger would receive an easy ride, but it could alter the environment in which any future proposal was assessed.

Fresh produce suppliers would have their own reasons to watch closely. Combining two of Britain’s biggest supermarket buyers could produce major efficiencies in sourcing, distribution and store operations. It could also concentrate further purchasing power in a sector where growers and suppliers already face intense pressure on costs and margins.

Any renewed proposal would therefore ignite debate not only about consumer prices, but about supplier relationships, range, routes to market and the resilience of Britain’s food supply chain.

For now, an Asda-Sainsbury’s reunion remains speculation rather than a transaction. Sainsbury’s says the Argos sale is about sharpening its focus on food, while Asda is pursuing its own turnaround.

But with Sainsbury’s becoming a leaner, grocery-led business and Asda still searching for a route back to sustained growth, the logic that brought them together in 2018 has not disappeared.

Seven years on, Britain’s biggest supermarket “what if?” may not be quite finished yet.