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Sainsbury's-Asda pledge 1 billion pounds of price cuts to salvage deal

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Sainsbury's-Asda pledge 1 billion pounds of price cuts to salvage deal
FILE PHOTO: Customers shop in a Sainsbury's store in Redhill, Britain, March 27, 2018. REUTERS/Peter Nicholls/File Photo   -   Copyright  Peter Nicholls(Reuters)
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LONDON (Reuters) – British supermarket Sainsbury’s and its takeover target Asda have committed to deliver 1 billion pounds of lower prices annually by the third year after completion of their proposed 7.3 billion pounds deal.

They also said on Tuesday they would divest supermarkets and petrol forecourts across both brands but did not provide figures.

Sainsbury’s and Asda are attempting to overturn brutal provisional findings from Britain’s competition regulator, the Competition and Markets Authority (CMA), which is examining the deal.

The CMA said last month its initial view was that Sainsbury’s purchase of Walmart’s Asda should be blocked in the absence of the sale of a large number of stores, or even one of the brands.

Sainsbury’s and Asda said they strongly disagreed with the CMA’s findings and said the regulator’s analysis contained “significant errors”.

The two groups said they would invest 300 million pounds in the first year after combining and a further 700 million over the following two years as cost savings flow through.

Sainsbury’s and Asda had previously said they would lower prices on “everyday items” by around 10 percent, financed by cost savings from big multi-national suppliers but had not quantified the impact in cash terms.

The two groups said the price commitments would be independently reviewed, with the results published in order to hold them to public account.

Sainsbury’s said it would cap its fuel gross profit margin to no more than 3.5 pence per litre for five years, while Asda will guarantee its existing fuel pricing strategy.

Sainsbury’s also committed to pay small suppliers, with turnover with the business of less than 250,000 pounds, within 14 days, while Asda will continue to pay its small suppliers within 14 days.

(Reporting by James Davey, Editing by Paul Sandle)

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