Asda buys UK and Ireland service station operator EG Group for £2.3bn as supermarket giant sees growth in foodservice
- Asda and EG Group have a combined annual turnover of almost £30 billion
- Both firms are led 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 petrol station operator EG Group’s UK and Irish operations in a deal worth around £2.3 billion.
The transaction combines the 640 stores and online operations of Britain’s third largest grocer with EG Group’s estimated 350 filling locations and 1,000 food-to-go stores.
Both companies are owned by private equity firm TDR Capital and Blackburn-born brothers Mohsin and Zuber Issa, who bought a majority stake in Asda two years ago as part of a leveraged buyout.
Asda said the deal would put the expanded company in a stronger position to take advantage of the ‘very attractive structural factors’ impacting the foodservice and convenience sectors
The combined company will have total annual sales of nearly £30 billion, serve 21 million customers a week and employ approximately 170,000 people.
Asda said the acquisition would create an enlarged company that is in a stronger position to take advantage of the “highly attractive structural factors” affecting the foodservice and convenience sectors.
The group said consumers are more likely to shop at local outlets while working from home and are “increasingly prioritizing” takeout and food-to-go options due to their busy lifestyles.
The supermarket chain also expects to earn an additional £195 million in underlying after-rent revenue, while generating around £100 million in profit and loss synergies over the next three years.
To fund the deal, Asda is tapping shareholders for approximately £450m in equity, generating approximately £1.1bn in property related sales and raising £770m in term loans.
Once the acquisition is complete, the supermarket chain plans to spend more than £150m to consolidate the two businesses.
All EC sites in the UK and Ireland will be converted to the Asda brand, with the exception of approximately 30 service stations which are not part of the acquisition.
Mohsin Issa will remain at the head of the company to oversee the integration as the supermarket searches for a new CEO.
He said: ‘Asda is committed to saving customers valuable time and money in their shopping baskets and on the forecourt.
“The combination of Asda and EG UK&I will be positive news for motorists as we can offer Asda’s highly competitive fuel offering to even more customers.”
Stuart Rose, Asda’s chairman, said the deal will create ‘a consumer champion the likes of which the UK has never seen’. Throughout my retail career, one thing has always been true: meeting the changing needs of customers is the path to growth.”
He added: ‘This transaction is all about driving growth by bringing value to Asda’s heritage for even more communities and accelerating the growth of its convenience store business.’
Rose, who previously ran Marks & Spencer, was appointed chairman nine months after Asda was acquired by the Issa brothers and TDR Capital.
Asda further revealed on Tuesday that its like-for-like sales rose 7.8 percent in the first quarter of this year as market share fell from other ‘Big Four’ rivals.