Walmart declares float plan for £7.3 billion Asda after failed merger

US giant Walmart has publicly admitted for the first time it is “seriously considering” a float of the UK’s third-biggest supermarket Asda following its failed merger with Sainsbury’s.

Judith McKenna, international president of Asda’s owner Walmart, yesterday told a meeting of 1200 managers in Leeds of the plan.

It comes after rival Sainsbury’s £7.3 billion audacious bid to buy the grocer was thwarted by the competition authorities.

McKenna, who was once chief operating officer at Asda, admitted an IPO could “take years”, acknowledging speculation about the grocer’s future for the first time. It would mark a final retreat for Walmart 20 years after it bought the chain in 1999 in a £6.7 billion deal. Sources say bankers at Morgan Stanley have already been sounding out investor appetite for a float.

Asda has been working with bankers at Rothschild and Credit Suisse on the Sainsbury’s deal. But Walmart could still see possible suitors, such as private-equity giant KKR, swoop as Walmart is keen to offload it. Asda’s core grocery business has been in decline for much of this decade, stabilising more recently.

Some in the City were dismissive of Asda’s intention to float. “There’s no clamour for UK retail, there’s no rush [to buy]. The requirement is for the market to change. You have Brexit, the discounters growing and Sainsbury’s doing a price reset. It’s too early to go to the market,” said Bernstein’s Bruno Monteyne.

Shore Capital’s retail analyst Clive Black added: “No doubt a dual process may be under way, an IPO could be a tactic to tempt financial buyers too. Such a move would not come as a major surprise to the market, nor ourselves it should be said, as Walmart has clearly suggested that the UK does not form part of its strategic thinking.”

The chain’s assets include its high level of freeholds — Asda owns about 75% of its stores — and its clothing brand George, Britain’s second-biggest by volume. But doubts over likely dividend payouts and future growth could dampen the price.

Roger Burnley, Asda’s chief executive, who was previously working at Sainsbury’s, told managers he will invest £80 million to keep prices down in stores for the rest of the year.

Asda and Sainsbury’s had promised to deliver £1 billion of lower prices. Both have now said it will take longer to achieve price cuts on their own.