Blackburn’s Issa brothers reveal plan to sell off Asda’s petrol stations in £750m deal while borrowing a massive £3.5bn to fuel supermarket takeover
- EG Group is owned by investment firm TDR Capital, and Zuber and Mohsin Issa
- The UK competition authorities must approve EG Group’s acquisition of Asda
- AA’s Luke Bosdet: Asda ‘has been the standout retailer for fair pump prices’
Petrol station operator EG Group has said it will buy the forecourt business of Asda exactly four months after its owners agreed to acquire the supermarket from Walmart.
The Blackburn based firm, which is co-owned by private equity group TDR Capital and brothers Zuber and Mohsin Issa, declared it would obtain Asda’s car washes, ancillary land and petrol filling stations assets for £750million.
EG Group believes the takeover will be finalised in the second quarter of the year, and will add to the more than 6,000 forecourts it already runs across the world.
Preferred bidder: Any deal is expected to value the supermarket at around £6.5billion
The Issas and TDR Capital also said it expects to complete the £6.8billion purchase of Asda by the end of the month and will finance it through issuing £2.75billion in loan notes and creating a new £740million loan facility.
The Competition and Markets Authority (CMA) must approve the EG Group’s acquisition of the supermarket chain, which will additionally be funded through selling some of Asda’s distribution assets to property investors.
Once that happens, both Issa brothers will join the board of Asda, as will TDR Capital founder Manjit Dale and partner Gary Lindsay, Chris Nicholas, the finance boss of Walmart International, and Asda chief executive Roger Burnley.
Burnley revealed today that Asda had a robust set of sales over the Christmas period, with growth of 6.9 per cent in the eight weeks to December 24.
He said of EG Group’s financing announcement: ‘Whilst the transaction remains subject to CMA approval, we will work closely with our new owners on how these Asda sites would operate as part of the EG Group under the Asda brand.’
It is understood that the combination of Asda’s forecourt business with EG will also help drive the expansion of more Asda on the Move convenience stores at existing EG petrol stations.
Billionaire brothers Mohsin and Zuber Issa own 50 per cent of Blackburn-based EG Group
AA fuel price spokesman Luke Bosdet said that the Leeds-based supermarket ‘has been the standout retailer for fair pump prices – often 2p a litre cheaper than even other supermarkets.
‘Ask people in a town without an Asda forecourt where the cheapest fuel can be found, and many will point you to a neighbouring town with one.
‘The thing is that supermarket superstores rely on customers with cars to come to them and fill their boots. Asda has consistently recognised that and set its pump prices to reinforce that relationship.’
Asda was bought by the American retail giant Walmart for £6.7billion in 1999, 50 years after being founded by Sir Noel Stockdale, and brothers Peter and Fred Asquith.
The Competition and Markets Authority (CMA) must approve the EG Group’s purchase of Asda
It was Britain’s second-largest supermarket chain for much of the 2000s before being overtaken by Sainsbury’s in the middle of last decade, though it did reclaim the second-place position again in 2019.
Thanks to a solid performance during the coronavirus pandemic, Asda gave back £340million it claimed in business rates relief from the government. Sainsbury’s, Tesco, and Aldi have also agreed to return public Covid relief.
In a joint statement, the Issa brothers said: ‘We look forward to working with our Asda colleagues to build an even stronger, more differentiated retailer – including through the investment of more than £1billion in the next three years to further strengthen the business and its supply chain.
‘We are also excited about the proposed integration of the Asda forecourts into EG’s established UK operations, which we believe would underpin the future growth of the combined network.’