The Issa brothers and TDR Capital have revealed that they plan to sell Asda’s forecourt business to their own EG Group, as well as certain distribution assets to property investors, to help fund their planned £6.8bn acquisition of the supermarket group from Walmart.
EG Group will acquire Asda’s 300+ petrol filling stations, car washes and ancillary land for a headline enterprise value of £750m. The deal is subject to the same CMA regulatory clearance being sought by the Issa’s and TDR for their acquisition of Asda.
Zuber Issa and Mohsin Issa, co-founders and co-CEOs of EG Group, said a detailed integration plan will ensure a seamless transition of the forecourts into its existing UK operations. However, the sites will remain part of the retail locations where they are currently situated and continue to be Asda branded.
The brothers and TDR Capital also revealed today that the Asda deal will be financed by raising £3.5bn in debt and a plan to sell certain distribution assets to institutional property investors following CMA and FCA clearance.
Asda operates 39 distribution facilities in the UK serving its stores. The sale and leaseback deal will leave the retailer continuing to operate the sites with the prospective owners having no day-to-day impact on the operations.
Meanwhile, it was revealed that once the takeover has been completed, the Asda board will comprise of Zuber and Mohsin, Manjit Dale and Gary Lindsay of TDR Capital, Chris Nicholas, EVP and CFO for Walmart International, and Asda’s CEO Roger Burnley. Independent directors will be added “in due course”.
A statement from the Issa brothers said: “With TDR Capital, our long time partners, we are committed to supporting Roger Burnley, chief executive of Asda, and his team as they continue to reposition the business to drive long-term growth. We are putting in place a robust capital structure to support that growth strategy, and we are confident that external investors will share our belief in Asda’s strong fundamentals and exciting future prospects.
“Looking ahead, and subject to the required regulatory approvals, we look forward to working with our Asda colleagues to build an even stronger, more differentiated retailer – including through the investment of more than £1 billion 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.”
Subject to approval from the FCA, the acquisition of Asda is expected to complete later this month. However, the transaction will remain subject to clearance from the CMA, which is currently expected in the second quarter this year.
Commenting on today’s announcements by the Issa brothers and TDR, Burnley said: “The main elements relate to how they are planning to finance their purchase and include the proposed sale of the Asda petrol forecourts sites to EG Group. 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 and ensure they continue to be a price leader in the fuel sector.”
Ahead of full final quarter figures, the CEO revealed that Asda’s sales grew 6.9% during the 8 weeks to 24 December.
NAM Implications:
- Whilst the financial elements of the proposed acquisition package seem complex…
- …the fact remains that following acquisition…
- …there will be considerable focus on financial performance.
- Not only to justify the purchase price…
- …but more importantly, because Walmart still have skin in the game…
