The Asda Sainsbury’s merger is a bold and sensible idea. They should be left to get on with it.

Trolley wars between Britain’s giant supermarkets just got a new set of blades. In one of the most daring takeover swoops for decades, Sainsbury’s has persuaded the US giant, Walmart, to part with Asda, its UK supermarket operations, to create a new mega-grocer pushing Tesco off the top slot.

Its a brilliant, albeit defensive, strike by Sainsbury’s boss, Mike Coupe, to combine the second biggest supermarket in the market – his – with Asda, which is the third largest. Together the two chains will have 31.4% of the UK’s food retailing market with sales of £50bn and 2,800 stores, putting the new Sainsbury’s-Asda group at the top of the league.

It’s a bold move by Coupe because the Sainsbury’s chief executive knows that industry opposition to the deal will be seismic, and that he will have to fight tough to get the merger through the Competition and Markets Authority. Industry rivals and politicians are already pointing out that the new combo – together with Tesco – will control nearly 60% of the food market between them, and fear that together the duopoly will dominate the industry, leading to price rises and a squeeze on suppliers.

But Coupe, who used to work at Asda, and his counterpart at Asda, Roger Burnley, who used to work at Sainsbury’s, know that unless they move swiftly to grow market share and tighten up profit margins, they too will be eaten into by Germany’s highly successful discounters, Aldi and Lidl. They are also acutely aware they need to be prepared for whatever it is that Amazon – which acquired the US Whole Foods last year and has a delivery partnership with Morrisons – might be planning to do next.

Indeed, Sainsbury’s was quick to head-off the expected criticism. Coupe says the merger will allow the two chains – which will be kept as separate brands – to cut prices on many products by about 10%, and to slash £500m from overheads.

But that raises a bigger question of whether they can cut prices enough to compete with the deep price-cutting of the German discounter which have bitten deeply into Asda’s sales, one of the reasons why Walmart is willing to bow out.

The financing of the cash and stock deal is straightforward. Walmart is selling Asda to Sainsbury’s for £7.3 billion pound ($10.1 billion) plus £3bn cash, and it will retain a 42% stake in the new group. The deal gives Walmart a smart way to get out of running Asda, allowing it to concentrate on growing online sales in the US where it is head to head with Amazon. It has already retrenched from many of its overseas markets from Germany to South Korea.

Even thinking about merging the number two and three in the food industry a few years ago would have been sacrilege. There was an unwritten understanding that having four big grocers – Tesco, Sainsburys, Asda and Morrisons – competing against each other kept down prices and pressure off suppliers. Five years ago they had 76.3% of the overall market.

Not anymore. Their grip has fallen to just under 70% and profit margins have fallen too: stripped to the bone to around 2%. And the reason? The extraordinary growth of Aldi and Lidl with their fierce price-cutting has transformed the UK shopping market beyond recognition.

Today they have a 7.3% and 5.3% slice of the food market respectively, and are growing like topsy. Aldi wants to double the number of stores to 1,000 over the next few years while Lidl is adding 50 new stores a year.

What’s more, shoppers are no longer so tribal about where they shop – everyone loves a bargain whether its yummy mummy Waitrose loyalists or middle-class Sainsbury’s followers. They are all after the bargain rib-eye steak or £5 bottle of Prosecco.

Coupe and Burnley will have a rough time persuading the CMA that they should be allowed to go ahead with the merger. But the CMA’s surprising decision to allow Tesco to merge with Booker last year must have added to their confidence that the authorities are taking a more flexible approach to competition in the food market.

The duo will argue also that the dynamics of the food market are also changing rapidly because the long-term threat of online retailing. In other words, Amazon.

Quite rightly, supermarket bosses are terrified of Amazon, and what Jeff Bezos is planning to do with his Whole Foods business. To date, the UK business is small but its customer base is enormous. According to insiders, Bezos is persuaded that over the next decade there will be enormous growth in the home delivery of fresh and chilled foods: not of the Indian or Thai takeaway sort, but of more traditional foods. And Bezos has a pretty good track record on figuring out what customers want

Although its still in its early stages, Amazon has a delivery partnership with the fresh foods Pantry division of Morrisons, still the fourth biggest food retailer with 10%. Analysts reckon the northern based Morrisons could be the one to benefit most by the new merger by buying up some of the stores, making it ripe for Amazon – or whoever – to takeover. That’s why Sainsbury’s and Asda have been so audacious with this merger. It’s refreshing to see two of the UK’s most successful businessmen looking ahead to the future – even if they don’t quite know what it looks like – rather than being taken out by a competitor. With a few store sales here and there, the CMA should give them the green light to get on with it.