por admin » Vie Abr 26, 2019 3:04 pm
Walmart Stock Is Slipping After a Deal for U.K. Grocer Sainsbury Got Blocked
By Teresa Rivas
Updated April 25, 2019 11:21 a.m. ET
Photograph by Luke MacGregor/Bloomberg
Walmart stock and J Sainsbury ADRs were slipping in Thursday morning trading on news that their merger isn’t happening.
The back story. In the spring of last year, amid a wave of news on mergers and acquisitions, Walmart announced plans to combine its U.K. grocery unit, Asda, with supermarket chain Sainsbury, creating a new company. The deal would have given Walmart (ticker: WMT) a 42% share of the combined entity, valued at some $9 billion. However, Thursday’s news isn’t the first hint of trouble. Earlier this year, the U.K.’s antitrust regulator warned that it might block the deal over concerns about competition, a move that crushed Sainsbury stock (JSAIY).
What’s new. On Thursday, U.K. regulators officially blocked the Asda-Sainsbury deal, arguing that it would be anticompetitive and benefit shareholders over shoppers. The agency was concerned that the new company, along with Tesco (TSCDY), would control nearly 60% of the grocery market share in the U.K., and was unmoved by the companies’ pledges to keep prices low.
Looking ahead. As Barron’s has noted before, not completing the Asda-Sainsbury deal would be little more than a glancing blow to Walmart. The nation’s largest retailer had reason to pursue the matchup, but the company has largely been focused on major growth markets recently, such as India and China, and the mature British market couldn’t be farther from that paradigm. If that’s the direction that Walmart wants to double down on, we noted that Asda is large enough that a private-equity firm or other buyer could be interested in taking it off its hands.
EDITOR'S CHOICE
Amazon Doubled Its Profit and Obliterated Wall Street’s Expectations for Earnings
Wall Street Thinks Chevron Will Beat Occidental in the Fight for Anadarko Petroleum
Microsoft Reached $1 Trillion in Value After the Stock Jumped on Blockbuster Earnings
Indeed, the latter might look more and more appealing to Walmart, given the British market’s uncertainty, namely Brexit. Not surprisingly, the prediction that Brexit would be bad for the U.K. economy, not to mention a whole host of companies, industries and investors, is playing out. And it is a situation that has been made worse by the protracted and contentious negotiations. That has certainly affected consumer sentiment, as was clearly on display this past holiday season. While U.S. consumers were freely spending, there was little Christmas joy to be found from Oxford to Bond Streets, as worried Britons felt it prudent to pinch pennies, a situation that led to “unprecedented” discounting from desperate retailers. For a glimpse into the pain that U.S. retailers with U.K. exposure are feeling, look no further than Walgreens Boots Alliance (WBA), which is down more than 22% since the start of the year, hurt by its lower 2019 profit outlook. That comes in part from poor performance at its Boots division, which also weighed on the stock in 2018.
So while there is more incentive than ever for Walmart to get rid of Asda, the fact that its shares are trading down just 0.2% to $103.32 Thursday morning, while Sainsbury’s ADRs are off 2.3% to $11.85, shows which company the market thinks has the most to lose from the defunct deal.