Days after announcing the disposal of its operations in Italy, Blackburn-headquartered forecourt and convenience site operator EG Group has announced that it has entered into an agreement to sell its Australian business to local firm Ampol.
The transaction values EG Australia, which operates around 540 sites, at an enterprise value of A$1.1bn, comprising A$850m of cash proceeds and A$250m of Ampol stock.
Ampol is one of Australia’s largest petrol and diesel suppliers, with the EG sites already co-branded with its name. Analysts suggested that the deal could face scrutiny from competition regulators, which may result in some sites being divested by the new owner.
For EG Group, the sale is part of a strategy to focus on its core markets and strengthen its balance sheet, with the proceeds to be used for debt reduction.
Russ Colaco, CEO of EG Group, said: “This transaction is a significant milestone in our ongoing efforts to streamline EG Group’s global portfolio and sharpen our focus on the markets where we see the largest growth opportunities … We remain fully focused on executing our strategy and building a platform for further growth, with our world-class grocery & merchandise, foodservice and fuel retail proposition.”
The end of the low-interest-rate era curtailed years of debt-fuelled expansion by the company and forced it to sell assets to reduce leverage. The group’s net debt stands at around $5bn, equivalent to almost five times last year’s adjusted earnings.
EG Group currently has more than 5,000 sites across nine countries, with revenues exceeding $24bn last year.
Over the weekend, Zuber Issa, co-founder of the EG Group, revealed that he wants to explore a sale of its $5bn-plus US unit as an alternative to private equity backer TDR Capital’s plan for an IPO of the entire business.
NAM Implications:
- A ‘cut-to-fit’ potentially profitable demand process in play…
- …that will inevitably continue until an estate size is reached where it is possible to generate acceptable levels of return.
