Seven years after a proposed merger between Sainsbury’s and Asda was blocked by the Competition and Markets Authority (CMA), discussions of a possible deal between the two British supermarket chains have resurfaced amid shifting market conditions and regulatory leadership.

In 2019, the CMA intervened to stop the £12 billion merger on the grounds that it would reduce competition, increase prices, and diminish product quality and choice for consumers. The deal was abandoned following considerable backlash, and Sainsbury’s then-CEO Mike Coupe resigned after being caught on camera celebrating the announcement prematurely. However, recent developments have renewed speculation about the viability of a union between the second- and third-largest grocery retailers in the UK.

Sainsbury’s announced on Friday its sale of Argos to a consortium led by seasoned retailer Richard Pennycook for £120 million, a significant downturn from the £1.4 billion it paid for the business in 2016. This move reflects wider strategic adjustments by Sainsbury’s amid increasing market pressures.

Asda has faced particular challenges since its acquisition in 2021 by a consortium including private equity firm TDR and brothers Mohsin and Zuber Issa, who are prominent figures in the petrol retail sector. Following the takeover, Asda—traditionally noted for competitive fuel pricing—raised its petrol prices slightly to address debt interest obligations, leading many customers to shift their loyalty to competitors Tesco and Sainsbury’s. Concurrently, the rise in interest rates amidst post-pandemic inflation further burdened Asda’s financial position.

The competitive landscape has also been intensified by the growth of German discount chains Aldi and Lidl, whose expanding market shares have pressured profit margins across the sector. As a result, Asda’s market share fell from 14.9% in 2019 to 11.5%, edging close to Aldi’s share, which is nearing third place in the UK grocery market.

Veteran executive chairman Allan Leighton is leading efforts to reverse Asda’s decline, but the company reported a loss of £1 billion for the year ending December 2025, following a return to lower prices aimed at recapturing consumers. Revenue and same-store sales declined, and the company also took a £344 million write-off on its property holdings.

Additionally, Marks & Spencer’s expansion of its food division has introduced a further competitive element in the sector’s upmarket segment.

Sources close to Sainsbury’s indicate the timing could be favorable for revisiting a potential tie-up with Asda, which could leverage Sainsbury’s strong presence in southern England alongside Asda’s broader reach in northern regions. Industry insiders suggest Sainsbury’s investment bank UBS is likely investigating the feasibility of a renewed acquisition bid, especially as TDR grows increasingly eager to divest Asda. Attempts at a public listing for Asda appear unlikely due to the weakness of the UK stock market.

Regulatory dynamics have also shifted. Under former Chancellor Rachel Reeves, the CMA chairmanship changed hands from Marcus Bokkerink to Doug Gurr, who brings experience from Amazon and the tech sector. This new leadership is expected to adopt a broader perspective in evaluating competition, considering the impact of online grocery platforms such as Ocado and Amazon—factors that were less prominent during the previous CMA review.

A combined Sainsbury’s-Asda entity would hold a 26.7% share of the UK grocery market, closely challenging Tesco’s dominant 28.2%. Sainsbury’s currently holds 15.2%, and Asda 11.5%, making the partnership a potential counterbalance to Tesco’s market leadership.

While Sainsbury’s chairman Martin Scicluna, known for overseeing major corporate sales at insurer RSA, might support such a deal, Chief Executive Simon Roberts may be cautious given the complexity and risks based on prior experience. Some analysts remain skeptical; retail consultant and former Asda buyer Ged Futter indicated concerns that an acquisition could ultimately benefit Tesco by further consolidating market dynamics, especially given Asda’s current struggles.

As market pressures continue to mount and competition intensifies, the prospect of a renewed Sainsbury’s-Asda merger remains uncertain but increasingly plausible.