Sainsbury’s engaged in preliminary merger talks with Morrisons during the current year to examine a potential multibillion-pound transaction, according to reporting by the Financial Times and Sky News. The two supermarket chains are understood to have ceased active discussions on the matter. Both companies declined to provide comment on the reports.
Morrisons, formerly one of the United Kingdom’s four largest grocers, was acquired by American private equity firm Clayton Dubilier & Rice in 2021. The acquisition resulted in the company carrying over £7 billion in debt, which has constrained its ability to grow competitively against major rivals. The retailer’s market position has faced additional pressure, with German discount chain Lidl surpassing it in market share this year.
A combination of Sainsbury’s and Morrisons would have generated a business controlling approximately 23.6% of the UK grocery market, still trailing industry leader Tesco’s 27.8% share based on Worldpanel by Numerator data. Sainsbury’s currently ranks as the nation’s second-largest grocer with a 15.2% market share. Any merger between the two would have faced significant regulatory scrutiny from the Competition and Markets Authority, which blocked a 2019 proposal combining Sainsbury’s and Asda on competition grounds. The regulator might have required store divestitures to approve such a transaction.
Clayton Dubilier & Rice has indicated openness to alternative supermarket combinations involving Morrisons, with potential participation from Asda, which is majority-controlled by private equity firm TDR Capital. Consolidation in the grocery sector carries political sensitivity given widespread household concerns about sustained food price increases in recent years.
Meanwhile, Lidl GB reported a 10% increase in annual revenue to over £13 billion, with pre-tax profits rising 30% to £245.5 million in the twelve months ending in February, as consumers increasingly purchased discounted fresh produce and specialty offerings.
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