CMA slays Sainsbury's, Asda attempt to create supermarket Thanos

The problems with the deal were obvious at the outset. The CMA's decision to block it will now raise questions about the future of Sainsbury's CEO Mike Coupe

Asbury’s has reached the end game.

The attempt by Sainsbury’s and Asda to create a supermarket sector Thanos has been killed off by the Avengers at the Competition & Markets Authority before getting so much as a whiff of an infinity stone.

Of course the prospective merger partners (especially Sainsbury’s) see the decision to formally block the deal rather differently, arguing that it’s they who have been beaten up by a baddie of a regulator indulging in some dirty time travel tricks, namely making the decision and then working its way back through the evidence to justify it.

The problem with such an argument is obvious. For a body like the CMA to take such a step you’d have to present it with a deal that was fairly easy to shoot down in the first place. The decision to kibosh a merger isn't something regulators take lightly.

But the creation of a monster with a near 30 per cent market share in a high profile sector - Asbury's would have been bigger than even kingpin Tesco and would have enjoyed a dominant position in some areas - made it relatively easy.

You do rather wonder how Sainsbury's boss Mike Coupe and his BFFs at Asda owner Wal-Mart thought they could get away with it unless they took the view that the CMA was totally toothless and would bow down and hail their glorious creation like some doting city analyst after a job in the investor relations department.

The regulator instead obeyed the forms and conducted one of the more exhaustive investigations we have seen in recent years.

It found that while new kids on the block Aldi and Lidl have had a big impact on the grocery market, they are used by people as an adjunct. Consumer behaviour has changed somewhat in recent years, but the big four supermarkets are still the mainstays when it comes to the weekly shop. It’s more of a big three when it comes to online shopping.

Reducing the number through a merger of the second and third, both of which are much bigger than number four Morrison’s, would thus pose a serious risk to prices and service standards, notwithstanding the grandiose claim made by Sainsbury’s of putting £1bn back into shoppers’ pockets. The offer to sell 150 stores or so after the CMA's negative provisional findings was limp indeed. Perhaps the two realised the game was up.

In preventing the deal the public interest has been served by the CMA. That’s something you can’t very often say about corporate mergers and acquisitions in the UK, where it is only on competition grounds that bad deals like this one can be kiboshed. The CMA will not always be able to save us from them.

In the meantime, Sainsbury’s, has been left in a bind. Ditto Coupe. While Asda has been reviving and Wal-Mart, which long term would still like to dispose of it, can afford to take its time with its charge, Sainsbury’s figures have been grim through much of the merger process.

In shooting for the stars, the company and its leader Coupe have been guilty of allowing the home front to crumble. Both the failure of this deal, and the relative failure of Sainsbury’s to compete with its rivals, are on him.

The CMA waving its hammer has probably has signalled his doom.