Home » UK Business News » Asda to acquire 350 petrol forecourts and 1,000 takeaways in £2.27 billion deal

Asda to acquire 350 petrol forecourts and 1,000 takeaways in £2.27 billion deal

By Nagasunder in UK Business News, posted May 31, 2023

Asda is set to acquire 350 petrol forecourts and 1,000 takeaways in the UK and Ireland from its sister company, EG Group, in a deal worth £2.27 billion.

This acquisition aligns with Asda's goal of surpassing Sainsbury's to become the UK's second-largest grocer.

Stuart Rose, Chair of Asda, said the acquisition would create a formidable consumer advocate committed to being a price leader in fuel and offering the lowest grocery prices among the UK's major supermarket chains.

However, the deal is financed through £770 million in new loans and £450 million in new funds from the Issa brothers.

The billionaires bought Asda with private-equity firm TDR Capital, purchased Asda in 2020.

Additionally, £1.1 billion will be raised through the sale and lease-back of Asda supermarkets, further burdening the business with financial liabilities.

Clive Black, an analyst at Shore Capital, raised concerns about the high level of debt incurred by Asda through this deal, saying it could hinder the company's ability to compete on price, especially with rising interest rates and increasing competition from discounters like Aldi and Lidl.

The GMB union's national officer for Asda workers, Nadine Houghton, questioned whether workers would face lower pay or higher costs due to the financial obligations incurred by the company.

The long-awaited merger of Asda and EG Group is expected to create a combined business worth approximately £10 billion.

It will enable Asda to expand further into convenience retail and increase the presence of cafes and takeaways within its operations.

The combined group is projected to serve around 21 million customers per week and generate revenues of nearly £30 billion.

Both companies are chaired by Stuart Rose, former CEO of Marks & Spencer.

He said the combined business would have a sustainable capital structure, with profits from EG's UK forecourts helping to service the additional debts.

He expressed the ambition to grow the business, highlighting Asda has gained market share since the new owners took over.

Currently, Asda holds a 13.9 percent share of the grocery market, making it the UK's third-largest supermarket, while Sainsbury's holds 14.8 percent according to Kantar research.

Upon acquiring EG, the combined group will operate approximately 640 supermarkets, 700 petrol forecourts, and 1,000 takeaways, including major franchises such as KFC and Subway.

All EG sites acquired will be rebranded as Asda, with 166 EG locations already renamed as Asda on the Move.

Mohsin Issa, co-owner and boss of Asda, highlighted the deal would accelerate the retailer's expansion into convenience retail.

He noted converting EG's existing forecourt convenience stores to Asda had already resulted in nearly doubling sales at sites where it had been implemented.

Issa suggested job cuts would not be widespread since there was no significant overlap in skills between Asda and EG, despite expected cost savings of £100 million.

EG Group will retain about 30 petrol stations in the UK, including its first Euro Garages site in Bury, near its Blackburn headquarters, which it plans to develop separately.

It will also keep its Cooplands bakery business and other food service brands.

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Due to the shared ownership of Asda and EG, the deal is not expected to undergo rigorous scrutiny by the Competition and Markets Authority, which already considers the two companies as one entity.

Asda said it would invest over £150 million in integrating the combined businesses over the next three years.

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