NEWS

Walmart considers Asda options, including IPO

Published on: 26th April 2019

The US retailer is mulling over an Asda listing after the UK’s CMA blocked a proposed merger with Sainsbury’s.

As reported by Bloomberg, Walmart is exploring options for its Asda unit including an initial public offering, after plans to combine the business with Sainsbury’s to create the UK’s largest supermarket chain collapsed.

UK antitrust regulators’ decision to block the £7.3b ($9.4b) deal threw up a roadblock to the world’s largest retailer as it moves to reshape its international operations. Walmart was aiming to focus on faster-growing markets than Britain, where a shift to online shopping and the rise of discounters Aldi and Lidl are making life difficult for traditional supermarket chains.

As Sainsbury struggles to contain fallout after the UK Competition and Markets Authority’s move, Walmart signaled that it’s in no hurry to move on. Asda’s improved performance recently eases pressure on Walmart to take any immediate decisions. The chain has reported seven consecutive quarters of growth, helped by a combination of lower prices, an improving online business and demand for its own-label products.

“Our focus now is continuing to position Asda as a strong UK retailer delivering for customers,” Judith McKenna, chief executive officer of Walmart International, said in a statement after the Thursday ruling. “Walmart will ensure Asda has the resources it needs to achieve that.”

Walmart shares traded 0.2% lower early Thursday in New York.

In addition to a potential listing of Asda, the US retailer may also revisit a sale, though interest from private-equity firms has so far been lukewarm, said the people familiar with the situation, who asked not to be identified because discussions are private. Walmart plans to take its time to analyse the most feasible strategy for Asda and could opt to keep the business, one of the people said.

Walmart has revamped its international portfolio by selling a majority stake in its Brazilian business and acquiring a majority interest in Indian e-commerce leader Flipkart Group in its biggest-ever deal.

A deal with Sainsbury’s would have let the US giant keep a foot in the UK through a minority holding in the combined company, without the headaches of managing day-to-day operations in one of the world’s most competitive markets. An Asda IPO could give the unit a similar structure to Walmart’s separately listed Mexico and Central America business.

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