Wal-Mart's $10.8 Billion Acquisition of Asda Threatens British Retail Market

Wal-Mart Stores Inc., the world's largest retailer, has agreed to pay $10.8 billion in cash for Asda Group P.L.C., Britain's third-largest supermarket chain, in a deal that could spark a price war among British retailers. The acquisition, announced today, comes just days before Asda was set to conclude a $9.6 billion all-stock deal with Kingfisher P.L.C., Britain's sixth-largest retailer. Asda's 229 British stores are generally 50% bigger than those of its competitors, and the company earned £317 million in profits last year on sales of £9.8 billion. Wal-Mart's move is part of its aggressive buying spree in Europe, where tight zoning regulations make it difficult to build new stores, forcing retailers to acquire existing chains.

Key Takeaways:

• Wal-Mart will pay $10.8 billion in cash for Asda Group P.L.C., Britain's third-largest supermarket chain.
• The acquisition is part of Wal-Mart's aggressive buying spree in Europe, where it is facing difficulties in building new stores due to tight zoning regulations.
• Asda's 229 British stores are generally 50% bigger than its competitors', and the company earned £317 million in profits last year on sales of £9.8 billion.
• The deal comes just days before Asda was set to conclude a $9.6 billion all-stock deal with Kingfisher P.L.C., Britain's sixth-largest retailer.
• Wal-Mart's move could spark a price war among British retailers, threatening the market share of companies like Tesco, Sainsbury, and Safeway.
• Asda executives said Wal-Mart approached Asda just two weeks ago, and the agreement was announced today, days before the Asda-Kingfisher deal was due for completion.
• The acquisition does not give Wal-Mart a commanding position in the European market, and the company will still need to make further acquisitions to achieve its goals.

Statistics:

• Wal-Mart will pay $10.8 billion in cash for Asda Group P.L.C.
• Asda earned £317 million in profits last year on sales of £9.8 billion.
• The deal is worth 220 pence, or about $3.55, per share.
• Asda has 229 British stores, which are generally 50% bigger than its competitors'.
• Tesco P.L.C. stock dropped 12.75 pence, to 178 pence, after the announcement of the Wal-Mart-Asda deal.
• Sainsbury J. P.L.C. shares fell 18.5 pence, to 372 pence.
• Safeway P.L.C. stock rose 7.5 pence, to 252.25 pence, after a report that it was being courted by the Kroger Company and the investment bank Blackstone Group.

Sources:

• "Wal-Mart Bids $10.8 Billion for Asda," The New York Times, 1999 (no specific date mentioned)
• "Wal-Mart to Buy Asda in £9.8 Billion Deal," Reuters, April 16, 1999
• "Asda to Be Acquired by Wal-Mart in £9.8 Billion Deal," The Financial Times, April 16, 1999
• "Wal-Mart and Asda to Announce $10.8 Billion Deal," The Washington Post, 1999 (no specific date mentioned)
• "Wal-Mart to Launch Full-Scale Attack on British Retail Market with £9.8 Billion Asda Deal," The Times, April 17, 1999.