Walmart will receive 3 billion pounds in cash and a 42% stake in the combined business' equity, valuing Asda at about 7.3 billion pounds on a debt-free basis. Sainsbury's equity was valued at 6 billion pounds at Friday's close.
Asda would "continue to be Asda", stated the retailer's CEO Roger Burnley: "The combination of Asda and Sainsbury's into a single retailing group will be great news for Asda customers, allowing us to deliver even lower prices in-store and even greater choice". Together, the supermarket chains employ 330,000 people.
"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".
Sainsbury's CEO Mike Coupe said no stores will be closed and no jobs will be lost as a result of the merger.
The UK Competition and Markets Authority past year approved Tesco's takeover of wholesaler Booker, saying the deal would not reduce competition in the sector, which is known for its razor-thin margins and frequent price wars.
The Combination expects to lower prices by 10% on products that customers purchase regularly.
"We believe this combination will create a dynamic new retail player better positioned for even more success in a fast-changing and competitive United Kingdom market", said Judith McKenna, president and chief executive officer of Walmart International.
The Bentonville, Arkansas-based Walmart, meanwhile, is building fewer big stores and focusing more on internet businesses in an effort to compete for the online shoppers who use Amazon.
Shares in Sainsbury's jumped 20 percent, to 325 pence, at the market open.
Shadow business secretary Rebecca Long-Bailey echoed Sir Vince's calls, warning the merger risks "squeezing what little competition there is in the groceries market even further".
Sir Vince said the CMA should force the companies to sell off stores if the merger meant the new giant was dominant in a particular area, telling the watchdog's new chief, Andrew Tyrie, to "get tough with monopolies".
Sainsbury shares soared 15 percent while Tesco dropped over 1 percent, Morrison was little changed and Marks & Spencer shed 0.4 percent.
Separately, Sainsbury reported full-year pretax profit rose 1.4% on an adjusted basis to 589 million pounds, beating the analyst consensus of 573 million pounds.
Asda was said to have generated its fourth consecutive quarter of positive like-for-like sales growth in the quarter ended March.
In results-driven moves, the world's biggest advertising group WPP surged up 9 percent after reporting forecast-beating sales in its first results without founder Martin Sorrell. Operating profit in 2017 for Asda was said to be around GBP720 million, down from GBP845 million the year prior.