The Issa brothers, founders and co-CEOs of EG Group, a global convenience and forecourts retailer, and investment funds managed by private equity firm TDR Capital, have together agreed to acquire Asda, Walmart’s wholly-owned UK business, for £6.8 bn (€7.5 bn).
The deal, which was struck on a debt-free and cash-free basis, brings the UK's second largest supermarket group - behind Tesco and ahead of Sainsbury's - back into British hands. The Blackburn-based Issa brothers unveiled plans to move on the grocer earlier this year, after a planned merger between Asda and Sainsbury's was blocked by the UK's competition authorities last spring.
Under the new ownership structure, the Issa brothers and TDR Capital will acquire a majority stake in Asda. Walmart will retain an equity investment in the business, with an ongoing commercial relationship and a seat on the board.
Grocery businesses have attracted renewed scrutiny after outperforming during the pandemic. Asda almost doubled its online operations during the first half of the year, the firm said. In addition, Asda owns the freehold to 75% of its 639 stores, a much higher proportion than its rivals, with Sainsbury's owning 51% and Tesco 57%.
Analysts suggest that there is significant potential for unlocking value from the portfolio via sale-and-leaseback deals or redevelopment schemes, with supermarkets increasingly being incorporated into mixed-used developments.
Mohsin and Zuber Issa said: 'We are very proud to be investing in Asda, an iconic British business that we have admired for many years.
'Asda’s customer-centric philosophy, focus on operational excellence and commitment to the communities in which it operates are the same values that we have built EG Group on. Asda’s performance through the Covid-19 pandemic has demonstrated the fundamental strength and resilience of the business, and we are excited to support Roger and his team as they continue to reposition the business to drive long-term growth.'
Asda will remain headquartered in Leeds, and will continue to be led by Roger Burnley who will form part of Asda’s board alongside representatives appointed by the Issa brothers, TDR Capital and Walmart.
'We believe that our experience with EG Group, including our expertise around convenience and brand partnerships and our successful partnership with TDR Capital, can help to accelerate and execute that growth strategy,' the Issa brothers added.
'After a successful period as part of Walmart we are looking forward to helping Asda build a differentiated business that will continue to serve customers brilliantly in communities across the UK.'
Asda CEO Burnley said: 'In a constantly changing retailing environment, our new ownership will further enhance our resilience, whilst creating significant, additional opportunities to drive growth.'
Gary Lindsay at TDR Capital said: 'Asda is a strong and well-managed business with one of the leading brands in UK retail. We are proud to be investing alongside Mohsin and Zuber, who have built EG Group into a global convenience retailer and will now bring that experience to bear at Asda. We look forward to supporting them, and Roger Burnley and the management team at Asda, to build on the business’s inherent strengths and drive long-term sustainable growth.'
The EG Group deal remains subject to approval from the UK competitions authority and is expected to close in the first half of 2021.
