Asda’s merger with EG sparks fears of fuel price hikes and job cuts
Billionaires merge Asda with petrol giant in £2bn deal: move sparks fears of fuel price rises and job losses
- Regulators intend to examine Asda’s £2.3bn deal for service station operator EG Group
- The deal falls under the British competition watchdog’s fuel price investigation
- Unions fear the deal will lead to significant job losses
Regulators intend to look into Asda’s £2.3bn deal for a service station operator over fears it could drive up fuel prices.
The supermarket chain will take over the UK and Ireland operations of the EG Group and create a company with a turnover of almost £30 billion and 170,000 employees, conceived in one fell swoop by the Issa brothers.
The deal, which values the combined group at £10bn, ends months of speculation over what Asda owners, the Issa brothers, would do with their petrol company, which sought to reduce its £7bn mountain of debt.
Merger: Asda will acquire EG Group’s UK and Irish operations, creating a company with a turnover of nearly £30bn and 170,000 employees
But the combination of Asda and EG Group will bring together 600 supermarkets, 700 petrol stations and 100 convenience stores, raising questions about petrol price competition.
While the deal does not qualify for a full merger review in the UK, as both firms are co-owned by the brothers and private equity firm TDA Capital, it will fall in the UK’s competition watchdog’s fuel price investigation.
Earlier this month, the Competition and Markets Authority (CMA) said it will question supermarket bosses after finding evidence that retailers have raised fuel prices to unnecessarily high levels.
It found that rising pump prices cannot be attributed solely to global factors, such as Russia’s invasion of Ukraine, and examines whether “any competitive failure” is driving consumers to pay more.
Pressure group FairFuelUK said this could be a potential obstacle for Asda.
“The CMA has its sights on Asda regarding the manipulation of pump prices as wholesale costs have fallen sharply,” said FairFuelUK founder Howard Cox.
He also expressed concern over Asda’s pricing in light of EG’s mountain of debt, and called on the competition regulator to take a stance.
“The CMA needs to stop this latest merger so that cheaper supermarket fueling options are not lost to drivers under the weight of much higher pump prices from the greedy EC,” Cox said.
UK diesel and petrol prices are already unfairly higher than they need to be. The latest EC business shenanigans will keep it that way unless the CMA takes action to stop this deal.”
Masterminds: The Issa brothers bought Asda for £6.8 billion in 2020
And the collaboration has also set alarm bells ringing among unions, who fear the deal will lead to heavy job losses.
In a letter to Stuart Rose, chairman of both Asda and EG, Nadine Houghton, GMB National Officer, said she had “deep concerns” about the merger.
“Is this the start of a massive attack on working people’s wages across Asda?” she asked.
There have been rumors of a link between Asda and the EG Group since the Issa brothers bought the supermarket in 2020 for £6.8 billion. They plunged into Asda after former owner Walmart’s plan to sell it to Sainsbury’s was blocked.
Zuber Issa said EG’s entry into Asda was “an important strategic step”. Meanwhile, retail veteran Rose said: ‘Asda’s acquisition of EG UK and Ireland will create a consumer champion unlike anything the UK has seen before.’
Rose told reporters the grocer “will still be the price leader in the UK on petrol”.
It’s unclear who will lead the combined group, but sources have suggested Imran Nawaz, Tesco’s chief financial officer, and Shirine Khoury-Haq, Co-op’s chief financial officer, could be in the running.