Sainsbury’s held merger talks with smaller rival Morrisons
UK supermarkets discussed potential multibillion-pound deal between November and February before Sainsbury’s walked away
Sainsbury’s held talks this year with private equity-owned rival Morrisons over a potential multibillion-pound deal that would provide a fresh test of regulators’ appetite for consolidation in the UK’s fiercely competitive supermarket industry.
Preliminary discussions over a combination between the companies took place between November 2025 and February this year before Sainsbury’s decided to walk away, according to people familiar with the matter.
There are no active talks between the two sides, although people close to the situation did not rule out negotiations restarting in the future. Sainsbury’s and Morrisons declined to comment.
A combination of Britain’s second- and fifth-largest supermarkets would shake up the industry and potentially create a more formidable competitor to market leader Tesco. On paper, it would form a grocery business with a 23.6 per cent market share, narrowing the gap to Tesco, which controls 27.8 per cent of the market, according to Worldpanel by Numerator.
However, Sainsbury’s would almost certainly be required to sell stores to gain approval for any deal, which would be closely scrutinised by the Competition and Markets Authority.
In 2019, the UK’s competition watchdog blocked Sainsbury’s attempt to buy Asda, the UK’s third-largest supermarket, for £7.3bn on the basis that it would result in a loss of competition and higher prices for customers.
Since then, a historic bout of food inflation has led to further scrutiny of rising grocery prices in the UK, meaning that any attempted merger would be politically sensitive.
Competition in the industry has intensified further since the attempted Sainsbury’s-Asda merger. Aldi and Lidl have continued to open stores, with the German discounters now accounting for a combined 19.3 per cent of grocery sales. Aldi has broken into the industry’s “big four” at the expense of Morrisons.
The discounters are now designated by the Groceries Code Adjudicator, an industry regulator, and the CMA as “large grocery retailers” — a shift that people in the industry expect will form an important part of the deliberations around any future supermarket combination.
Morrisons has lost significant ground since it was acquired for £10bn including debt by private equity firm Clayton Dubilier & Rice in 2021. The deal loaded its balance sheet with £7.5bn debt at a time of sharply rising borrowing costs.
For Sainsbury’s, the talks come at a time when chief executive Simon Roberts has made headway with his desire to focus the business more firmly on food. The company has exited banking and recently agreed to sell Argos, its general merchandise chain.
Shares in Sainsbury’s, which has a market capitalisation of £7.2bn, fell slightly on news of the lapsed talks and were broadly flat in afternoon trading on Monday.
The company operates more than 600 supermarkets and almost 900 convenience stores. Morrisons operates about 500 supermarkets and over 1,700 convenience stores, around 700 of which are franchise outlets.