Walmart Sells Asda to British Gas Station Billionaires, TDR Capital

LONDON – Eighteen months after Britain’s competition authority nixed the proposed merger of supermarket giants Asda and Sainsbury’s, Walmart has found new owners for Asda. The deal is valued at 6.8 billion pounds, on a debt-free, cash-free basis.

On Friday, Walmart Inc. confirmed that the billionaire Issa brothers, who own gas stations and adjacent convenience stores globally, have teamed with U.K.-based private equity firm TDR Capital LLP to take a majority stake in Asda Group Ltd. Walmart said it will retain an equity investment, an ongoing commercial relationship and a seat on the board.

Zuber and Mohsin Issa are the founders and co-chief executive officers of EG Group, a global convenience and forecourts retailer with more than 6,000 sites that is based in Blackburn, England. They had long been tipped in the British press as front-runners in the race to acquire Asda.

The deal should come as a relief to Walmart, which had been looking to offload the supermarket chain it purchased in 1999. Walmart has long been keen to leave the U.K. retail market due to the increasing competition from European discounters such as Lidl and Aldi, lack of growth opportunity and the rise of the retail behemoth Amazon, which owns Whole Foods.

In April, 2019 Britain’s competition authority killed off the proposed merger between Sainsbury’s and Asda. That merger would have created Britain’s largest grocer, with revenues in excess of 50 billion pounds.

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The Competition and Markets Authority’s decision came one year after the two retail giants rocked markets with promises of creating a “dynamic new player” that would lower prices by 10 percent on frequently purchased products and offer better services to consumers.

But the competition authority wasn’t having any of it, and ruled that the proposed merger would have “substantially lessened” competition in a number of U.K. markets.

On Friday, Walmart touted the “new British ownership,” of Asda and said the enterprise value of the deal is 6.8 billion pounds. The transaction is subject to regulatory approvals and is expected to complete in the first half of 2021.

“At a time of evolution in the U.K. food retail sector, the new owners will continue to build a strong and successful business, benefiting from fresh capital and expertise, as well as valuable links with the world’s largest retailer. The Issa brothers, backed by TDR Capital, will support and accelerate Asda’s existing strategy, which is anchored in delivering low prices and convenience to customers however they want to shop,” the statement said.

Walmart noted that under ceo Roger Burnley, Asda has so far demonstrated “huge resilience” during the COVID-19 pandemic, almost doubling its online operations in a matter of months.

Asda will continue to invest in accelerating its omnichannel offer and “the resilience of its supply chain, including sourcing more food from U.K. farmers and maintaining its commitment to supporting domestic suppliers and small businesses,” the statement added.

Asda will remain headquartered in Leeds, England and will continue to be led by Burnley, who will form part of Asda’s board alongside representatives appointed by the Issa brothers, TDR Capital and Walmart.

The Issa brothers will bring significant additional expertise, Walmart said, particularly in convenience retail and brand partnerships. The new owners also plan to invest more than 1 billion pounds in the next three years in Asda to further strengthen the business and its supply chain.

Judith McKenna, president and ceo of Walmart International, said the deal “creates the right ownership structure for Asda, building on its 71-year heritage, while bringing a new entrepreneurial flair, not only to Asda, but also to U.K. retailing. 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.”

Mohsin and Zuber Issa said that 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. We are excited to support Roger and his team as they continue to reposition the business to drive long-term growth.”

Gary Lindsay of TDR Capital called the supermarket chain “one of the leading brands in U.K. 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 to build on the business’s inherent strengths and drive long-term sustainable growth.”

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