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American investment firm KKR is considering making a bid on Walmart’s British subsidiary Asda, now that the merger between Asda and Sainsbury’s is beginning to look very unlikely.
Economies of scale
Last week, the planned merger was jeopardised after British competition watchdog CMA expressed serious objections. The merger of the second and third biggest players would lead to a considerable decrease in competition, both locally and nationally, the CMA complained.
KKR’s interest in Asda does not come as a surprise: “The market knew that Asda was for sale,” Gervais Williams of Miton fund managers says. In addition, KKR is in a close partnership with Tony De Nunzio, former Asda CEO.
Nothing has been revealed about the sum of the bid, but the assumption is that it will be lower than the estimated 7.3 billion pounds (around 8 billion euros) involved in the Sainsbury’s deal. In this case, the economies of scale will be considerably smaller, after all.
