Sainsbury’s and Morrisons explored merger talks before discussions ended
Sainsbury's and Morrisons held exploratory merger talks this year to create one of Britain's biggest supermarket chains, though the companies are no longer in active discussions. The proposed deal would have created a business with a 23.6% market share, making it the second-largest supermarket group behind Tesco, and would have represented the biggest shake-up for UK grocers in decades. The talks highlight Morrisons' struggles since being bought by US private equity firm Clayton Dubilier & Rice in 2021, which loaded it with over £7bn in debt, whilst the German discounter Lidl has overtaken it in market share this year.
The combined entity would still have fallen short of Tesco's 27.8% market share. Any formal merger would almost certainly have faced scrutiny from the Competition and Markets Authority, which blocked the proposed £7bn merger between Sainsbury's and Asda in 2019 on competition grounds and could have required store sales as a condition of approval. Clayton Dubilier & Rice remains open to alternative tie-ups involving Morrisons, potentially with Asda, which is itself owned by private equity firm TDR Capital.
- Sainsbury's and Morrisons held merger talks this year but are no longer in active discussions.
- The combined firm would have created a 23.6% market share, still behind Tesco's 27.8%.
- Any deal would likely face CMA scrutiny, given the 2019 Asda-Sainsbury's merger was blocked.
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Sainsbury's and Morrisons are two of Britain's largest supermarket chains. The two companies explored combining this year to form one of the UK's biggest grocery retailers.
Morrisons has faced mounting pressure since being bought by an American private equity company in 2021, which left it with significant debt. The company has also been surpassed by newer competitors, including Lidl, a German discount chain. A merger would have combined their stores and operations into one larger business.
Any merger between such major chains would require approval from the Competition and Markets Authority, the UK regulator responsible for examining whether deals reduce competition and harm consumers. This regulator previously blocked a proposed merger between Sainsbury's and Asda in 2019. Other supermarket companies, including Asda, are exploring potential tie-ups involving Morrisons.
Both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
A merger between Sainsbury's and Morrisons could strengthen both businesses, particularly given Morrisons' severe financial strain from its £7bn debt burden following the private equity buyout, which threatens its long-term viability. The combined entity would achieve significant economies of scale and operational efficiencies, enabling better investment in technology, supply chains and stores whilst remaining smaller than Tesco and avoiding monopolistic dominance. In an increasingly globalised market where UK retailers face competition from international chains and online platforms, consolidation allows the industry to invest more competitively and serve consumers better through improved innovation and efficiency.
The case against
Further consolidation in an already highly concentrated supermarket market risks reducing consumer choice and competitive pressure on prices. The CMA demonstrated in 2019 that it takes such concerns seriously by blocking the Sainsbury's-Asda merger, and consolidating the second and third largest grocers would similarly raise substantial competition concerns. Whilst discounters like Lidl and Aldi do compete, they typically target different customer segments and shopping occasions, meaning fewer major traditional supermarkets could ultimately leave many consumers with reduced choice and diminished pressure on incumbents to keep prices low or improve service quality.
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Originally published by The Guardian as “Sainsbury’s and Morrisons ‘held talks this year’ on multibillion-pound merger”.