Walmart (WMT) Is Making Early Talks on The Sale of Asda

On Wednesday, Feb. 26, 2020, Walmart (WMT) disclosed that it was making first phase talks concerning selling off a controlling stake in Asda, following demands from several parties.

Walmart which is described as the world’s largest retailer revealed that many parties made their intentions known to the company about acquiring a stake Asda, which is one of the United Kingdom’s supermarket chains. However, Walmart said it has not made any decision concerning investments from a third party.

In a statement noting that it intends to maintain a significant stake in Asda, even if a sale occurs in the future, Walmart said, “Together, we are in discussions with a small number of interested parties who share Walmart and Asda’s commitment and passion to grow the business.”

Walmart, however, did not reveal the names of the companies or investors that came forward to make acquisition intentions and said no further comments will be made concerning the issue.

Even though Walmart previously said it was considering launching an initial public offering for Asda, the company still reiterated the same during the announcement made on Wednesday.

This information is coming after a proposed 12 billion pounds merger between Asda and Sainsbury’s (SBRY.L) in 2019 was blocked by a competition regulator in the United Kingdom. With the deal, Asda’s valuation stood at 7.3 billion pounds. The deal was blocked because the competition and market authority had reservations of the aftermath of the merger on competition, saying that there would have been an increase in food and prices.

Overview of Asda

Asda was founded in the 1960s and it is situated at Yorkshire. It is the third-largest operational supermarket in the United Kingdom, with 600 outlets across the UK as well as over 140,000 employees. In 2018, the giant supermarket made a profit of 710.4 billion pounds and data obtained showed that its current revenue stands at 22.9 billion pounds. In 1999, Asda was acquired by Walmart in a deal that was around 7 billion pounds.

In response to recent competitions faced by Walmart, it has re-strategize by focusing less on its international divisions. Walmart sold its Chinese marketplace, Yihaodian to JD.com in 2016. Subsequently, in 2018 the company sold out a controlling stake in one of its units in Brazil to Advent International, a private equity firm, in 2018. 

As German grocery stores like Aldi and Lidl continue to offer discounts in a view to lure customers with lower prices, Asda and others are been put under extreme pressure.