Asda sold to billionaire Issa brothers in £6.8bn deal

Asda has been sold to two billionaire brothers from Blackburn and the private equity firm TDR Capital in a deal that values the supermarket chain at £6.8bn.

Asda, which was bought from the US retail giant Walmart, confirmed the sale to Mohsin and Zuber Issa, who made their fortunes building the EG Group petrol station empire, and TDR.

In a joint statement, Mohsin and Zuber Issa said they were “very proud to be investing in Asda, an iconic British business that we have admired for many years”.

Under the new ownership structure, the Issa brothers and TDR Capital will control Britain’s third-largest supermarket chain. Walmart is not exiting altogether and will retain a minority stake in the business and a seat on the board. The size of the buyers’ stakes and how much they paid for them has not been disclosed. The deal is being financed with £4bn of debt.

The £6.8bn price tag is only slightly more than the £6.7bn Walmart paid for Leeds-based Asda in 1999. Even with the US giant’s financial firepower behind it, Asda has struggled to come out on top in a ferociously competitive grocery market in which budget chains Aldi and Lidl have emerged as worthy adversaries.

Mohsin said buying Asda was not “just a financial investment for us” with the company’s culture very similar to EG, “not to mention our shared northern values, being from just across the Pennines. The brothers bring a wealth of experience in convenience retail as well as brand partnerships, and KFC, Starbucks and Krispy Kreme are among the companies with which EG Group works.

The businessmen leased their first petrol station in 1999 – the same year Walmart bought Asda – and today have more than 6,000 dotted across 10 countries. However, EG’s rapid expansion has been funded by loans, with last year’s accounts showing a debt pile of about £7bn.

Asda is not being merged with EG, which the Issa brothers also co-own with TDR , and some analysts think this is to avoid receiving a red flag from the competition authorities. However, Asda has already started trialling a new convenience brand, Asda on the Move, in three of EG’s forecourts in the Midlands, with more expected to follow.

Asda said it would continue to be based in Leeds and that Roger Burnley would remain as chief executive. The consortium has promised to invest £1bn in Asda over the next three years and to “maintain competitive pay levels” for staff. Neither side would comment on what the deal meant for the company’s long-running legal battle over equal pay, which has reached the supreme court.

Source: The Guardian