EG sells assets to Asda to slash debt costs and focus on overseas growth
EG Group has sold nearly all of its UK assets to Asda for an enterprise value of £2.27bn ($2.8bn), a business also controlled by the Issa Brothers.
The proceeds from the deal and the recent £1.4bn sale and leaseback of assets in the US is intended to pay off debt, which rising interest rates had made even more expensive to service.
In a statement the brothers insisted the deal will lead to further rollouts of foodservice, grocery and merchandise to create multi-purpose convenience retail sites across its estate including EV chargers, under its proprietary brand, evpoint, across the existing site network, as well as third-party locations.
The Waterside offices in Blackburn, UK, will remain as the global headquarters and shared service centre for the Group.
Asda is jointly owned by the Issa brothers, investment funds managed by TDR Capital LLP and Walmart is acquiring the EG business through an affiliate of its parent company, Bellis Acquisition Company 3 Limited, a wholly-owned subsidiary of the Asda Group.
On Asda’s side, the retailer plans to invest more than £150m within the next three years to fully integrate the combined business. As part of the transaction the shareholders are providing c. £450m of additional equity to fund the transaction.
The business will still consist of operations in the USA, Australia, Germany, France, Italy, the Netherlands, Luxembourg and Belgium, whilst also retaining c. 30 UK sites – including the first Euro Garages site in Bury – which are close to the Group headquarters and frequently used to trial innovation.
The Cooplands bakery business and certain other foodservice brands will also be retained. The Group will remain a leading global convenience retailer, generating over $25bn of annual revenue and more than $1bn of EBITDA, across 5,500 locations, underpinned by c. $6bn of freehold property.
The transaction is expected to complete in Q4 2023. Zuber Issa CBE, co-founder and co-CEO of EG Group, commented: “This transaction with Asda represents an important strategic step for EG Group. Following this sale, EG Group will benefit from a significantly strengthened balance sheet, supporting the continued roll out of its successful convenience retail, fuel and foodservice strategy and drive innovation to transform the consumer experience. This includes the ongoing investment and expansion of our EV charging business, evpoint, as well as hydrogen and other sustainable fuel retail infrastructure, which we continue to see as a significant future opportunity.
“I am confident the UK&I business will go from strength to strength under Asda’s ownership. Over the last 22 years we have built a business that I am extremely proud of, and EG Group will continue to maintain an important base in the UK, supporting the global business from our home in Blackburn.”
Stuart Rose, Chairman of EG Group, said: “Zuber and Mohsin Issa have spent the last two decades creating the best convenience retailing business in the UK. Their journey from one site to creating a global business has been extraordinary and reflects their vision, and ability to be a genuine disruptor in the forecourts market, turning these locations into destinations in their own right with food, coffee and convenience. Following this deal, they will remain in nine countries, with an even stronger business, which is able to focus on international growth.”
With his Asda Chair hat on Rose said: “Asda’s acquisition of EG UK and Ireland will create a consumer champion like the UK has never seen. Throughout my career in retail – one thing has always been true, that meeting the evolving needs of customers is the route to growth.
“This transaction is all about driving growth by bringing Asda’s heritage in value to even more communities and accelerating the growth of its convenience retail business.”
Gary Lindsay, Managing Partner at TDR Capital, said: “The sale of the EG UK&I business to Asda makes strategic sense for both parties and will enable EG Group to accelerate its growth in key markets including Europe, the US and Australia.
“The Group has developed a successful blueprint in the UK for developing one-stop shop sites which combine convenience retail, fuel and foodservice and there are significant value creation opportunities from rolling out this model, across the global estate.
“The Group remains at the leading edge of developing the forecourts of the future, and its ongoing development of alternative fuels and EV charging infrastructure.”