Asda to buy EG Group’s UK and Ireland operations for £2.3bn

Asda to buy petrol station operator EG Group’s UK and Ireland operations for £2.3bn as supermarket giant eyes foodservice boom

  • Asda and EG Group have a combined annual turnover of almost £30billion
  • Both firms are run by the Issa brothers and private equity group TDR Capital
  • Stuart Rose: Deal ‘will create a consumer champion like the UK has never seen’

Asda has agreed to acquire the UK and Ireland business of petrol station operator EG Group in a deal worth around £2.3billion.

The transaction will combine the 640 stores and online operations of Britain’s third largest grocer with the estimated 350 filling sites and 1,000 food-to-go stores  belonging to EG Group.

Both companies are owned by private equity firm TDR Capital and Blackburn-born brothers Mohsin and Zuber Issa, which purchased a majority stake in Asda as part of a leveraged buyout two years ago.

Asda said the deal would put the enlarged business in a stronger position to profit from the ‘highly attractive structural drivers’ impacting the food service and convenience sectors

The combined business will have a total annual turnover of almost £30billion, serve 21 million customers per week and employ about 170,000 workers.

Asda said the takeover would create an enlarged business that is in a stronger position to profit from the ‘highly attractive structural drivers’ impacting the foodservice and convenience sectors.

The group said consumers are shopping more often at local outlets while working from home and ‘increasingly prioritising’ takeaway and food-to-go options because of their busy lifestyle.

The supermarket chain also expects to earn an extra £195million in underlying earnings after rents, while generating approximately £100million in profit and loss synergies over the coming three years.

To fund the deal, Asda is tapping shareholders for about £450million in equity, making approximately £1.1billion of property-related sales and taking out £770million of term loan debt.

Once the takeover is finalised, the supermarket chain intends to spend more than £150million consolidating the two businesses.

All EG sites in the UK and Ireland will be converted to the Asda brand, with the exception of about 30 petrol stations that are not part of the acquisition.

Mohsin Issa will remain in charge of the business to oversee the integration while the supermarket searches for a new chief executive.

He said: ‘Asda is committed to saving customers precious time and money across their shopping baskets and on the forecourt. 

‘The combination of Asda and EG UK&I will be positive news for motorists, as we will be able to bring Asda’s highly competitive fuel offer to even more customers.’

Stuart Rose, Asda’s chairman, said the deal ‘will create a consumer champion like the UK has never seen. Throughout my career in retail – one thing has always been true, that meeting the evolving needs of customers is the route to growth’.

He added: ‘This transaction is all about driving growth by bringing Asda’s heritage in value to even more communities and accelerating the growth of its convenience retail business.’

Rose, who previously ran Marks & Spencer, was appointed to the chairmanship role nine months after Asda was taken over by the Issa brothers and TDR Capital.

Asda further revealed on Tuesday that its like-for-like revenue expanded by 7.8 per cent in the first quarter of this year as it took market share from other ‘Big Four’ rivals.