SUPERMARKET giants Sainsbury’s and Asda have vowed to continue to press ahead with their merger plans despite the competition watchdog outlining a number of concerns it believes they would find “difficult” to address.

The rivals announced their intention to join forces last April, with the Competition and Markets Authority (CMA) launching a formal investigation into their proposals in August.

While that probe, which was initially expect to conclude in March, is due to run until the end of April, the CMA announced its preliminary findings yesterday, noting that the deal would likely lead to “higher prices, a poorer shopping experience, and reductions in the range and quality of products offered”.

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It added that customers in the 463 areas where the two brands’ stores overlap would be hit hardest, with inflated fuel costs likely in the 100-plus locations where both operate a petrol station.

Asda, which is owned by US business Walmart, and Sainsbury’s, which is listed on the London Stock Exchange, issued a joint statement refuting the claims, saying that the CMA’s findings “fundamentally misunderstand how people shop in the UK today” while its analysis “is inconsistent with comparable cases”.

“Combining Sainsbury’s and Asda would create significant cost savings, which would allow us to lower prices,” they said.

“Despite the savings being independently reviewed by two separate industry specialists, the CMA has chosen to discount them as benefits.

“We are surprised that the CMA would choose to reject the opportunity to put money directly into customers’ pockets, particularly at this time of economic uncertainty.

“We will be working to understand the rationale behind these findings and will continue to press our case in the coming weeks.”

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Despite this, analyst Neil Wilson of Markets.com said the deal is now “dead in the water” as the “barriers to clearance now seem too high to clear”.

“The CMA has effectively killed this deal whatever management says and in spite of their insistence to fight on,” he said.

“The list of competition concerns raised by the deal is neither short not surprising. What's more surprising is the hubris that led Sainsbury’s to this point, and the fact that Sainsbury’s clearly thought the CMA’s bizarre decision to green light the Tesco takeover of Booker [which completed in March 2018] was enough to base its decision to press ahead with this merger.

“Maybe the CMA should factor in discounters more in its assessments - it's fascinating that the main reason behind this defensive major has not really factored in the CMA's assessments.

Jordan Hiscott, chief trader at Ayondo Markets, agreed, saying that “the future of the merger now looks almost completely doomed and I suspect Sainsbury will have to reassess its next move to compete in the supermarket sector”.

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Shares in Sainsbury’s were trading 16 per cent down yesterday at just under 242p after dropping by more than 45p when the CMA made its announcement. That has wiped out all the gains the company made in the past year, with its shares jumping from 269.8p on the day before the merger was revealed to 309p immediately after before rising to as much as 341.5p in August.

Stuart McIntosh, chair of the independent inquiry group carrying out the CMA investigation, noted that as the regulator’s findings are provisional at this stage, Asda, Sainsbury’s and any other interested parties have until March 13 to respond.