Asda’s new owners have agreed to offload a number of forecourts in order to allay competition concerns and formally complete their £6.8bn takeover of then business.
Addressing competition concerns
The move follows last month’s release of findings from the UK’s Competition and Markets Authority initial investigation into the deal in which it raised concerns about a lack of competition in localities already served by EG’s existing forecourts business and the potential for fuel price increases. Resolving this issue effectively means a more thorough Phase 2 investigation will not be needed and the deal can proceed. EG currently operates 395 forecourts and Asda 323.
Positive response from CMA
In a statement the Issa brothers and TDR Capital said: “Over the course of the past 10 days, we have been working constructively with the CMA to offer remedies to address the CMA’s competition concerns. Today, we are pleased to confirm that the CMA has indicated it has reasonable grounds to believe the proposed remedies are acceptable, enabling us to arrive at a conclusive outcome for the acquisition of Asda in Phase 1.
“As is usual in cases such as these, the CMA now has a period of 40 days to work through the detail of the proposed divestitures and therefore we are restricted in the level of information we are able to provide on specific sites.
“However, we have been comforted by the significant interest we have already received from potential buyers during this process, demonstrating the strong growth potential of our forecourts and the liquidity in the market. Over the coming months, we are confident that we will be able to agree a sale to suitable operators to take over all identified sites, and we will share more information in due course.”
Resolution will unlock investment
Finalising the deal will allow the Issa brothers to focus fully on their plans for developing the business. Key here is a pledge to invest £1bn in Asda in their first three years of ownership with a focus on improving Asda’s price positioning and pressing ahead with its category transformation programme to rationalise ranges and devote more space to fast growth categories. Asda will also develop its Partnerships strategy to find new footfall drivers for underused space in its large format stores.
Asda's forecourts business will be detached and integrated with EG's international forecourts business. The combined entity will become the second largest owner of owned forecourts in the UK after Motor Fuel Group, which now has over 900 - see story here
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