Asda pays £2.3bn to EG Group for UK petrol stations

Asda’s owners have confirmed that the supermarket group has acquired the UK and Ireland petrol-forecourt business from EG Group, for £2.3 billion.

Mohsin and Zuber Issa and TDR Capital (a London-based private equity company) said that the deal will create a business with combined revenues of almost £30 billion. The new company would have 581 supermarkets and 700 petrol forecourts. It would also have 100 convenience stores and around 170,000 employees.

Asda says the deal will allow it to create value-led Asda Express convenient stores and benefit as local shopping increases due to households adapting to hybrid work patterns.

Lord Rose of Monewden said that the transaction was all about driving growth. “This transaction will bring Asda’s heritage and value to more communities, and accelerate the growth of Asda’s convenience retail business.”

The supermarket chain intends to invest over £150 million in the next three year to integrate the business. The merger is expected to result in savings of around £100 million within the next three-year period.

Mohsin Issa will continue to be the leader of the business and said that the deal would allow him to offer “Asda’s highly competitive gasoline” to more customers.

Euromonitor estimates that the convenience and foodservice market is worth £40 billion, and £62 billion.

Asda announced that it has begun the search for a new chief executive. It will also hire more non-executive board members to strengthen its governance.

Since the brothers bought Asda and TDR two years ago, in a £6,8 billion leveraged purchase, the supermarket’s business has become increasingly intertwined with EG’s British forecourt. Total of 166 convenience stores called “Asda On the Go” have been installed in the petrol stations. The Issas, who bought Leon fast-food, opened dozens concessions at Asda supermarkets after EG purchased the chain. All the EG forecourts acquired by Asda will be rebranded.

The transaction will be financed by a combination between debt and equity. This includes approximately £450 million in equity provided by shareholders, £770 millions of term loan debt and £1.1 billion of property-related transactions.

EG’s UK operations reported a profit of £1.32 Billion on sales of £23.5 Billion.

Asda owes £4.7 billion. EG Group is said to have a debt of around £7 billion.

EG Group is active in the US, Australia and Germany. It also operates in France, Italy, The Netherlands, Luxembourg, Belgium, Luxembourg, France, Germany, France. The company will keep about 30 UK locations.