With potentially huge Asda equal pay claim back in court, forget talk of a flotation
Wamart is looking at options for its UK business, including a potential £12bn flotation, after the failure of its attempt to merge it with Sainsbury's. The pay claim seriously complicates them
Asda and Walmart executives have doubtless spent the day fielding calls from investment bankers keen to get involved in what could turn in to a very chunky flotation.
It follows Walmart International chief executive Judith McKenna telling a meeting of 1,200 managers that an IPO of Britain’s number three supermarket chain - soon to be number two given the way it’s performing vis a vis Sainsbury’s - is being “seriously considered”.
At the same time, McKenna reportedly warned that the path to such a share offering, in the wake of failure of the American retail giant’s attempt to merged the business with Sainsbury’s, could take years. Those bankers should take note.
Asda has been in the midst of an impressive revival, having posted seven consecutive quarters of growth. Its owner, which has its eyes on sexier, faster growing markets, would probably like to use this to drum up interest from a bidder who might be willing to pay a premium. But there’s been a conspicuous lack of interest following the Competition & Markets Authority’s decision to block the merger.
The UK’s competitive grocery sector, combined with the Brexit related uncertainties stoked by a dismal government and the grim political climate that’s emerged from them, make it a less than attractive market to enter right now.
But Asda also has another issue to grapple with: An equal pay claim involving thousands of GMB members that is back in court in Manchester this week.
At issue is the difference in pay rates offered to the largely female staff working in its stores when compared to those enjoyed by warehouse workers, who are predominantly male.
The claim holds that their jobs are of comparable value and so the same should be true of their wages. Law firm Leigh Day, which is litigating the case, has to date been clocking up victories at a rate even Manchester City might envy.
The dispute didn’t generate a lot of attention when the merger still looked like a runner and perhaps it should have. The costs could be astronomical if Asda’s workers take it all the way and find the back of the net. They’d be more than enough to put any talk about an IPO on indefinite hold.
The GMB has sought a meeting with Walmart bosses to discuss the potential flotation and the group's plans for the business.
“Any new investors must realise Asda is a profitable well-run company thanks to our members’ hard work,” national officer Gary Carter said.
Indeed so. Asda could yet demonstrate that if you fail to pay due heed to your workers, and their rights, it can come back to bite you in a big way.
Walmart bosses would be wise to take Carter’s call before they speak to any bankers.