Issa Brothers and TDR to acquire Asda from Walmart

Nick Gladding
Senior Retail Analyst
@RetailAnalysis

Date : 02 October 2020

Walmart has confirmed that the Issa brothers, co-CEOs of leading forecourt operator EG Group, and supported by TDR Capital have agreed to acquire its UK operations.

The deal in brief

  • Issa Brothers and TDR Capital will take equal shareholdings in Asda
  • Walmart will retain an equity stake with an ongoing commercial relationship
  • The deal values Asda at £6.8bn, on a debt-free and cash-free basis
  • Roger Burnley will remain as CEO and sit on Asda's board along with representatives appointed by the Issa brothers, TDR Capital and Walmart
  • The transaction is subject to regulatory approvals and is expected to complete in H1 2021

Accelerating Asda's existing strategy

The new owners have pledged to accelerate and support Asda's existing strategy with its emphasis on low prices by working closely with suppliers to provide the best value ranges for customers in the categories that matter most to them. Under its new owners Asda will accelerate its omnichannel offer, building on a near doubling of online operations over the last few months. Asda will also invest in the resilience of its supply chain, including sourcing more food from UK producers and maintaining its commitment to supporting domestic suppliers and small business.

The Issa brothers will also bring significant new expertise from their experience of building EG Group into a global convenience retailer with more than 6,000 sites. Key here will be their expertise in developing retail and and brand partnerships that will help Asda to address convenience shopper missions and boost its competitive performance.

Key pledges from the new owners

  • Support the current management team, led by Roger Burnley
  • Invest over £1 billion in the next three years in Asda to further strengthen the business and its supply chain
  • Continue to offer low prices across its stores and product categories for its customers
  • Ensure Asda remains a price leader in the supermarket fuel sector
  • Increase the proportion of UK-based suppliers, increasing the volume of products - such as chicken, dairy, wheat and potatoes - purchased from UK suppliers each year, as well as a commitment to source 100% British beef
  • Retain Asda’s existing payment terms for suppliers
  • Receive continued support and involvement of Walmart as an investor and partner, allowing Asda access to global innovation and buying power
  • Maintain competitive pay levels for Asda colleagues, and continue to provide exciting and enriching employment opportunities
  • Maintain its commitment to its Create Change for Better programme, which helps people living below the poverty line in the UK and supports local communities, among other good causes.

Who are the Issa brothers?

Mohsin and Zuber Issa founded Euro Garages with the acquisition of a single forecourt in 2001 in Bury. Over the last two decades, 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 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.

Comments on the deal

Judith McKenna, President and Chief Executive Officer of Walmart International said:
“We are delighted to be able to announce this deal today, which we believe creates the right ownership structure for Asda, building on its 71 year-heritage, whilst bringing a new entrepreneurial flair, not only to Asda, but also to UK retailing. I’m delighted that Walmart will retain a significant financial stake, a board seat, and will continue as a strategic partner. 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. This important combination will continue to keep customers and colleagues at Asda’s heart, which is important to us all.”

Roger Burnley, Chief Executive Officer of Asda, said:
“This new ownership opens an exciting new chapter in Asda’s long heritage of delivering great value for UK shoppers. With our combined investment, expertise and ambition; Asda, Walmart, the Issa brothers and TDR have an incredible opportunity to accelerate our existing strategy and develop an even more exciting offer for our customers as well as strengthen our business for our colleagues. In a constantly changing retailing environment, our new ownership will further enhance our resilience, whilst creating significant, additional opportunities to drive growth. For Asda colleagues, a strong and growing business is important for our long-term future. I want to thank every single one of our people for the incredible work they do serving our communities, and together our focus will remain on building a better Asda for the benefit of all.”

Mohsin and Zuber Issa said:
“We are very proud to be investing in Asda, an iconic British business that we have admired for many years. 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. Asda’s performance through the Covid-19 pandemic has demonstrated the fundamental strength and resilience of the business, and we are excited to support Roger and his team as they continue to reposition the business to drive long-term growth.

“We believe that our experience with EG Group, including our expertise around convenience and brand partnerships and our successful partnership with TDR Capital, can help to accelerate and execute that growth strategy. After a successful period as part of Walmart we are looking forward to helping Asda build a differentiated business that will continue to serve customers brilliantly in communities across the UK.”

Gary Lindsay at TDR Capital said: “Asda is a strong and well-managed business with one of the leading brands in UK 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 and the management team at Asda, to build on the business’s inherent strengths and drive long-term sustainable growth.”

 

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