British competition regulators have opened their inquiry into the proposed $8.8 billion sale of Walmart Inc.'s Asda unit to an investor group.
Britain's Competition and Markets Authority, which last year stopped Asda's sale to a rival supermarket chain, said in a public notice Monday that it is taking comments from interested parties through Dec. 22.
The authority will consider whether the transaction would result in less competition for goods and services within any markets in the U.K., according to the notice. The agency expects to announce its decision on the sale by Feb. 18.
Walmart struck a deal in October with an investor group comprising private equity firm TDR Capital and billionaire brothers Mohsin and Zuber Issa. The Bentonville-based retailer would retain a minority share of Asda and a seat on its board of directors.
In April 2019, the regulatory authority rejected Walmart's proposal to sell a majority stake of Asda to supermarket chain Sainsbury's for about $9.4 billion. Walmart had planned to retain a 42% share in the merged company.
The transaction would have created the U.K.'s largest supermarket chain. Regulators feared the resulting reduced competition would result in higher prices on goods and reduced product assortment.
The U.K. grocery market is "hypercompetitive," said Brian Yarbrough, a retail analyst for Edward Jones. Walmart has been losing market share there for several years, he said.
"I think the growth potential there longer term was not worth the investment that needed to be made," Yarbrough said. And though Walmart's earnings would take a hit in the first year after the sale because Asda was contributing positive earnings, Yarbrough said, "I think most investors would rather see them take that capital and invest it where they see a better long-term opportunity."
Walmart's global strategy for nearly two decades focused on expansion as it moved into countries including Brazil, Germany, South Korea, Mexico, Canada, Japan and the U.K.
But that has changed over the past couple of years, with Walmart pulling out of lower-performing markets and putting its resources into those where it sees more growth potential -- namely Mexico, Canada, India and China.
Walmart Chief Executive Officer Doug McMillon reaffirmed the international division's shift in focus while talking with investors last month about the company's third-quarter earnings.
"We know where to invest and we'll be aggressive where we should be while taking action in other areas," McMillon said.
Walmart had just sold 85% of its share in Seiyu GK, its Japanese operations, in a deal valued at $1.16 billion. Global investment firm KKR & Co. bought a 65% share in Seiyu, while a new subsidiary of e-commerce retailer Rakuten Inc. is taking a 20% share.
Though subject to regulatory approval, the sale is expected to close in early 2021. Walmart would retain a 15% stake in Seiyu and have representatives on a new board of directors made up of the three companies.
According to Walmart's website, the retailer entered the Japanese market in 2002 when it acquired a 6.1% stake in Seiyu. The supermarket chain became a wholly owned subsidiary of Walmart in 2008.
Earlier in November, Walmart said it was selling its business operations in Argentina to a South American retailer for an undisclosed sum. And in June 2018, Walmart sold 80% of its Brazilian unit to a private investment firm. The terms of that deal also were not released.
Walmart operates in 26 countries under 55 banners, plus numerous e-commerce websites. Despite shutdowns in several major markets during the third quarter because of the coronavirus pandemic, Walmart International posted revenue of $29.6 billion, up 1.3% over the previous year.