The two companies initiated discussions about a multibillion-pound merger before ultimately calling them off, according to reports. The deal would have brought together Sainsbury's, with a 15.2 percent market share, and Morrisons, which holds 8.4 percent, creating a group trailing only Tesco's 27.8 percent share.
The parties were reportedly preparing to argue to the Competition and Markets Authority (CMA) that the combined market share would still be smaller than Tesco's and that German discounters Aldi and Lidl, which together account for almost a fifth of the market, would continue to exert downward pressure on prices. They also planned to point to Morrisons' sale of its petrol stations as a factor reducing regulatory concern, and to argue that bringing Morrisons' 18 food-processing factories under a stronger parent could improve UK food security.
However, the regulatory path was never certain. The CMA, which blocked a similar attempt by Sainsbury's to merge with Asda in 2019, typically conducts site-by-site drive-time analysis to assess local competition. Even if a merger were ultimately approved, the number of store disposals required could have made the deal unpalatable. The regulatory instinct, observers say, would likely lean toward intervention to avoid a market where two companies control roughly half of grocery sales.
For Sainsbury's chief executive Simon Roberts, the regulatory distraction could have consumed a year or more. The company is currently in a relatively strong position, having recently sold both its bank and Argos, and is winning market share with stable profit margins and share buy-backs.