Private equity buyer of Asda reports 20-fold return from the deal

Asda’s private equity co-owner has reportedly valued its stake in the Leeds-headquartered chain at almost 20 times the amount it paid last year.

Marylebone-based fund TDR Capital and Blackburn-based brothers Mohsin and Zuber Issa used an unusually small amount of their own money in the £6.8bn acquisition.

They funded the rest by piling debt onto the supermarket chain and selling some of its assets.

The Financial Times has now reported that TDR has told investors it has already marked its stake at 19.8 times its original investment.

A marketing document for TDR’s latest fund, seen by the paper, pegs the valuation of the stake at about €1.7bn (£1.4bn), implying TDR may have put in only tens of millions of euros.

Such a return would far exceed most leveraged buyouts.

Together, the Issa brothers and TDR put in less than £800m worth of equity for the £6.8bn deal.

Asda’s core earnings rose 22.5% last year to £1.3bn, though part of that improvement came from a cut in operating costs caused by the pandemic.

Valuing Asda at 9.1 times core earnings would make it worth £11.8bn, including debt. This is more than 1.7 times its £6.8bn value when the Issas and TDR acquired it.