Asda and EG backers defend debt levels and offshore structures

TDR Capital's Gary Lindsay gives evidence

Senior executives from secretive private equity investor TDR Capital were brought into the full glare of political scrutiny yesterday (9 January 2024) as part of an ongoing enquiry into private equity’s impact on the UK retail sector.

Managing partner Gary Lindsay, chief operating officer Blair Thompson, and deputy general counsel Emma Gilks were questioned as part of a probe into private equity’s impact on the retail sector by the Business and Trade select committee.

They were accompanied by Michael Moore, chief executive of the British Private Equity & Venture Capital Association (BVCA), and a former Liberal Democrat minister in the 2010-2015 coalition government.

He was immediately pushed by committee chair Liam Byrne MP on the issue of debt levels in private equity backed companies and asked to give a figure, which he couldn’t.

But TDR’s Lindsay said: “We feel more than comfortable with the leverage level at Asda.

“We feel more than comfortable that when we decide to refinance the balance sheet in the next two or three years that the business can more than absorb that incremental cost.”

TDR Capital execs grilled

TDR joined forces with Issa brothers to buy Asda in a highly leveraged £6.8bn takeover.

Asda has acquired over 100 petrol stations from the Co-op and bought the UK assets of EG, which the Blackburn-born Issa brothers have grown rapidly through the use of complex offshore debt structures.

Lindsay pushed back and said the bigger vision is to grow Asda and that the structures allow a cash generative supermarket business to service those debts.

He told MPs: “We’ve invested organically £1.3bn in the business. That’s on some stores and clearly a very significant investment in colleagues.”

TDR Capital has backed the Issa brothers, Zuber and Moshin, in their rapid expansion of Euro Garages and their ambitious acquisition of Asda in February 2021.

Lindsay gave a robust defence of the Issa brothers who he said were “two of the most successful entrepreneurs the UK’s produced”.

He added: “Mohsin by his own admission was not pleased and not proud of his first performance, or his first attendance rather, in front of the committee.

“I hope based on the evidence that he provided on the 19th of December that he’s rectified that”.

The MPs persisted with the critical scrutiny of the complex financial structure and corporate governance of the Asda group and EG, especially the holdings in Jersey which committee chair Liam Byrne MP pointed out didn’t have stamp duty on asset sales when TDR and the Issa’s eventually exited.

TDR Capital’s Emma Gilks gives evidence

TDR deputy general counsel Emma Gilks defended the structure as “extremely transparent”.

She added: “The Asda structure for a business of its size and scale is not unusual. We believe it is entirely appropriate.”

Lindsay also pointed out that TDR was not operationally in control of Asda, or indeed EG, and that their shareholding was focused on growing the business by attracting more customers and moving into new markets. 

“I do also want to be clear, we as TDR Capital don’t run the business. We sit on the board. I don’t want to conflate what Asda do from a managerial perspective, how they engage and ultimately how they face off against different stakeholders in the business,” he said.

Their appearance at the hearing follows evidence given by both trade union GMB, who represent Asda staff, and the Issa brothers and their finance team at a committee session before Christmas.

Conservative MP Jonathan Gullis ripped into Lindsay over charges by the Competition and Markets Authority in November 2023 that Asda and EG were “one of the leaders in bumping up the price” and consumers were “ripped off at the pump”.

Lindsay said: “There wasn’t a particular strategy to bump the price of fuel or to make a larger profit on fuel.”

He also shrugged off the “notion that we were moving profit around between fuel and food”, insisting: “We are incredibly competitive when it comes to price across the business.”