- The billionaire Issa brothers & TDR Capital agree terms with Walmart to acquire majority stake in Asda
- The GBP 6.8 billion deal will brinbg Asda back under British ownership for the first time in 21 years
- The Issa brothers & TDR Capital to acquire Asda, with equal shareholdings; Walmart to retain an ongoing equity investment
By guest author Elias Jashan from Retail Gazette
Asda is returning to British ownership for the first time in 21 years after Walmart agreed terms for the £6.8 billion sale of the Big 4 grocer to the Issa brothers and TDR Capital.
Walmart confirmed that it has accepted a bid from a consortium led by Lancashire-based brothers Mohsin and Zuber Issa – the billionaire owners of petrol forecourt firm EG Group – following a lengthy auction process.
Under the new ownership structure, the Issa brothers and TDR Capital will acquire a majority ownership stake in Asda.
Walmart, the US retail giant that has owned Asda since 1999, will retain a minority stake in the Big 4 grocer as part of the agreement, along with an ongoing commercial relationship and a seat on the board.
The new owners have committed to keeping Asda’s headquarters in Leeds, as well as support the existing management team and maintain competitive pay levels for shop floor staff.
They also said they would invest over £1 billion in the next three years to further strengthen Asda’s business and its supply chain, and grow its convenience and online operations.
The news comes more than a year after the proposed GBP 12 billion merger between Asda and Big 4 rival Sainsbury’s was blocked by competition regulators at CMA.
Asda has seen its fortunes improve recently with trading strengthening throughout 2020, especially in the quarter ending June – the period covering the height of lockdown – as shoppers have spent more money on groceries during the pandemic.
Although online sales doubled during lockdown, the new owners will be tasked with expanding Asda’s digital business further to take advantage of soaring demand and make ground on rivals, such as Tesco, who have a larger slice of the market.
EG Group and TDR Capital will also face the challenge of keeping prices low amid tough economic conditions for shoppers and potential new tariffs on EU-imported foods, with the other Big 4 supermarkets all announcing a raft of price cuts in recent months.
The Issa brothers sealed the deal after Walmart selected their consortium as the preferred buyer earlier this week, placing them in pole position ahead of a bid by US-based private equity firm Apollo.
Last week, a third bid from Lone Star Funds, fronted by former Asda executive Paul Mason, was dropped after failing to meet the price of its rivals during the latter stage of the auction process.
“We are delighted to be able to announce this deal today, which we believe creates the right ownership structure for Asda, building on its 71 year-heritage, whilst bringing a new entrepreneurial flair, not only to Asda, but also to UK retailing,” Walmart chief executive Judith McKenna said.
“I’m delighted that Walmart will retain a significant financial stake, a board seat, and will continue as a strategic partner.
“Asda has been a powerhouse of innovation for the rest of the Walmart world, and we look forward to continuing to learn from them in the future.
“This important combination will continue to keep customers and colleagues at Asda’s heart, which is important to us all.”
Asda chief executive Roger Burnley said: “This new ownership opens an exciting new chapter in Asda’s long heritage of delivering great value for UK shoppers.
“With our combined investment, expertise and ambition; Asda, Walmart, the Issa brothers and TDR have an incredible opportunity to accelerate our existing strategy and develop an even more exciting offer for our customers as well as strengthen our business for our colleagues.
“In a constantly changing retailing environment, our new ownership will further enhance our resilience, whilst creating significant, additional opportunities to drive growth.
“For Asda colleagues, a strong and growing business is important for our long-term future.”
The Issa brothers 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.
“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.
“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.”
Walmart sought to offload a majority stake in Asda after the CMA blocked its merger with Sainsbury’s amid fears the move would push up prices and reduce product quality.
The US retail behemoth started new discussions over a sale of Asda in February, but saw these halted due to disruption from the coronavirus pandemic and subsequent lockdown.
However, the auction process restarted in July as Walmart sought to exit the UK, 21 years after it first purchased the Leeds-based grocer.
Blackburn-based EG Group, formerly known as Euro Garages, already runs forecourt convenience stores for Spar and French hypermarket chain Carrefour.
The deal still needs to pass through regulators, although it is expected to be given the green light and be completed by the first half of 2021.
Last week, EG Group announced a trial involving three “Asda on the Move” convenience stores at its petrol forecourts.
TDR Capital, which also owns the UK’s largest pub group Stonegate, owns a 50 per cent stake in EG Group, sharing ownership with the Issa brothers.