Sainsbury’s held exploratory merger talks with Morrisons earlier this year over a potential multibillion-pound deal that could have significantly reshaped the UK supermarket sector, according to reports.
The two supermarket groups held discussions about a possible combination, according to reports from the Financial Times and Sky News. The talks are understood to have since ended and are not currently active.
A deal between the two retailers would have brought together two of the UK’s major supermarket chains, potentially creating a business with significantly greater scale in an increasingly competitive grocery market.
A merger between Sainsbury’s and Morrisons would have created a business with a 23.6% market share, putting it still some way behind Britain’s biggest retailer, Tesco, which has 27.8% of the market, according to analysts at Worldpanel by Numerator.
Morrisons was once part of the UK’s “big four” alongside Tesco, Sainsbury’s and Asda, but has faced increasing pressure from both traditional supermarkets and discounters in recent years.
The retailer was acquired by US private equity firm Clayton, Dubilier & Rice (CD&R) in 2021 in a deal that left Morrisons with more than £7bn of debt.
Since then, the supermarket has struggled to match the growth of some of its rivals. German discounter Lidl overtook Morrisons in market share earlier this year, making it the UK’s fifth-largest supermarket.
The reported talks come amid wider speculation about further consolidation across the UK grocery sector, as supermarkets contend with intense price competition, rising operating costs and changing consumer shopping habits.
Morrisons has not indicated that it is currently pursuing a sale or merger, and the reported discussions with Sainsbury’s are understood not to be ongoing.
Clayton Dubilier & Rice, however, is open to a tie-up between Morrisons and another major supermarket, according to Sky. It reported that Asda, which is majority owned by the private equity firm TDR Capital, could also be drawn into deal talks.