The owners of forecourt operator EG Group are reported to have won the race to be the preferred bidder to buy Asda from Walmart.
Issa Brothers and TDR understood to be preferred bidders
Though not confirmed by Asda or Walmart at the time of writing, Sky News, citing City sources, has reported that a consortium led by Mohsin and Zuber Issa and backed by TDR Capital has been chosen by Walmart as the preferred bidder for its UK business. In so doing the Issa Brothers will have beaten a rival bid from Apollo Global Management which has been working with Rob Templeman, the former Debenhams CEO. A third bidder, private equity firm, Lone Star Funds, withdrew from the auction last week.
Merger failure triggers ownership rethink
The deal comes two years after the business tried to merge with Sainsbury's, a proposal that was blocked by the UK's Competition and Markets Authority. Since the failure of the merger and with competition from discounters impacting trading at its stores, Walmart has been keen to secure an alternative future for Asda which does not require its full ownership. This thinking has led to discussions with a number of parties, with EG Group, Apollo Global management and Lone Star Funds invited to take part in second round bids in March.
Walmart likely to retain minority stake
The deal is understood to value Asda at over £6.5bn (US$8.3bn), slightly less than at the time of the proposed merger with Sainsbury's, and is likely to see Walmart retain a minority stake in Asda. It is also reported that brothers and TDR want Roger Burnley to stay on as Asda's CEO. Confirmation of the deal could still be days or even weeks away as details are finalised and may well trigger another inquiry from the CMA.
Who is EG Group?
Founded in 2001 as Euro Garages with the acquisition of a single forecourt by the Issa brothers, EG Group has grown swiftly to become one of the world's largest forecourt operators with over 6,000 sites across 10 countries and revenues of €20bn made possible by financial engineering through TDR Capital. Key to its rapid expansion has been a focus on developing high quality modern in-store environments and retail proposition that are both attractive to motorists and often also function as local convenience stores. To do this, EG Group works with a range of retail and foodservice brands, including SPAR, Greggs and KFC in the UK. Only two weeks ago Asda announced a trial partnership with EG Group to develop 'Asda on the Move', a new convenience proposition for forecourts at three sites.
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