UK supermarket giants Sainsbury’s and Asda — two of the sector’s so-called big four grocers — have confirmed they intend to merge.

In a statement, Sainsbury’s said that Asda’s US owner Walmart will hold a 42% stake in the combined business, which values Asda at £7.3 billion ($10 billion) on a debt-free, cash-free, and pension-free basis, and both brands will be retained.

Assuming it gets regulatory approval, completion of the deal is expected in the second half of next year.

The combined business will be chaired by Sainsbury’s chairman David Tyler and led by the company’s chief executive Mike Coupe and chief financial officer Kevin O’Byrne. Asda will continue to be run from Leeds with its own chief executive.

The group will have combined sales of almost £50 billion a year and a 31.4% grocery market share.

Here’s how the combined group will fit into the market

By market share

The most recent market share data from the grocery experts Kantar Worldpanel puts Tesco, the UK’s longstanding number one, in the lead with a 27.6%.

Sainsbury’s and Asda command shares of 15.8% and 15.6% respectively, which means the combined business would ring up more 31.4% of UK grocery sales.

After the tie up the market will change to:

By customers

Tesco: 79 million shopper visits a week

Sainsbury’s and Asda: 44 million shopper visits a week

By stores

Tesco: 6,809 worldwide/3,400 UK

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Sainsbury’s and Asda: 2,000, plus 800 Argos outlets

By jobs

Tesco: 460,000/310,000 UK

Sainsbury’s and Asda: 330,000

By sales

Tesco: £51 billion

Sainsbury’s and Asda: £52 billion

By profit

Tesco: £1.3 billion

Sainsbury’s and Asda: £1.2 billion

In a statement this morning, Sainsbury’s chief executive Mike Coupe said:

This is a transformational opportunity to create a new force in UK retail, which will be more competitive and give customers more of what they want now and in the future. It will create a business that is more dynamic, more adaptable, more resilient and an even bigger contributor to the UK economy.

Having worked at Asda before Sainsbury’s, I understand the culture and the businesses well and believe they are the best possible fit. This creates a great deal for customers, colleagues, suppliers and shareholders and I am excited about the opportunities ahead and what we can achieve together.

The deal is now expected to come under significant regulatory scrutiny from former Treasury select committee chair Andrew Tyrie, who is about to take over at the Competition and Markets Authority.

Analysts in the City are expecting a lengthy approval process, one that could take the best part of 18 months, if not longer.

Bernstein, the US investment bank, said in a note to clients:

The Asda-Sainsbury’s deal is a classic case for the CMA, where there is no doubt at all that they are both in the same market.

Richard Hyman, a retail industry expert, wrote on his blog:

On the face of it, this should not be allowed to happen. However, nor should Booker/Tesco, so some think that has opened the door.

We are in the very early days of the restructuring of UK retailing. This will not be the last deal in supermarkets, and there will be much more in non-foods too. Watch this space.