Private equity firm TDR takes control of Asda after Zuber Issa sells stake

Private equity firm, TDR Capital, is to become the majority stakeholder in supermarket chain Asda, taking on a 22.5% stake from Zuber Issa, co-founder of Blackburn-based EG Group.

The move has been criticised by the GMB trade union, whose national officer, Nadine Houghton, said: “TDR Capital has serious questions to answer about their asset-stripping of Asda.

“Their private equity ownership has already been bad for consumers – with Asda now the most expensive retailer for fuel – and bad for staff, with millions of working hours cut from the shop floor.

“Further involvement from TDR can only spell more bad news. Bosses must change course to protect Asda workers and stop this British retailer further losing more market share.”

In a separate move, Zuber Issa announced today (June 7) that he has paid £228m in a deal to take control of EG Group’s remaining UK forecourts business.

TDR Capital, alongside brothers Zuber and Mohsin Issa, founders of EG Group, took control of Asda in 2021 following a £6.8bn deal.

Today, Asda announced the new ownership structure.

Mohsin Issa remains a co-owner in Leeds-based Asda alongside TDR Capital. This brings the ownership of Asda to 67.5% by TDR Capital, 22.5% by Mohsin Issa, and 10% by Walmart Inc. The transaction for Zuber Issa’s stake is set to complete in the third quarter of this year.

Gary Lindsay and Tom Mitchell, Managing Partners of TDR Capital, said: “We first invested into Asda over three years ago, seeing a huge opportunity to cement its position as one of the UK’s leading retail brands.

“By combining our investment and sector expertise with Asda’s heritage of delivering value for customers, we have already made significant progress in transforming Asda.

“As majority owners, we will continue to work closely with the Asda management team and colleagues across the business to support the ambitious strategy, which we believe is the right one to continue to move Asda forward.”

Stuart Rose, Chairman at Asda, said: “On behalf of the board, I welcome TDR’s increased investment in Asda – which is a clear sign of its commitment to the business.

“Asda’s heritage is in delivering great value for customers on a daily basis across its entire proposition from groceries to fashion and food-to-go – and the board has never been more committed to deliver on this promise. The board and shareholders continue to put in place the building blocks to position Asda for long term success and that is good news for colleagues, customers, suppliers and other business partners.”

Mohsin Issa said: “Today’s announcement further underlines my own and TDR’s confidence both in Asda and the UK consumer market. As a shareholder group, we are excited about the growth journey we are on.

“I also want to add my personal support and best wishes for Zuber’s plans as we continue our successful family partnership, working as partners on our personal co investments, family office philanthropy and Issa Foundation projects.”

Zuber Issa, co-founder and co-CEO of EG Group, said: “Since Mohsin and I, alongside TDR, took ownership of Asda, we have driven a period of significant investment and entrepreneurial growth activity.

“Notably, Asda acquired a market-leading UK convenience retail and foodservice store business from EG Group. With the divestment of my Asda shares, I will now turn my attention towards leading and managing the remaining EG UK forecourt sites that I have personally acquired, and spend more time on my charitable endeavours.”

Asda said it is undertaking an extensive international executive search to find a permanent CEO to lead the business in its next phase of growth.

Zuber and Mohsin Issa

Meanwhile, global forecourts and food service operator, EG Group confirmed it has agreed to sell its remaining UK forecourt business and certain standalone foodservice locations for £228m to Zuber Issa.

On completion Zuber will step down as co-CEO of EG Group, with Mohsin Issa continuing to lead the business as sole CEO. Zuber will retain his existing shareholding in the company and remain on the board as a non-executive director. TDR Capital and Mohsin’s shareholdings in EG Group also remain unchanged.

Mohsin and Zuber Issa said: “We have had an amazing journey together building EG Group over the last 20 years and we look forward to continuing to work closely together as fellow board members and shareholders in EG Group. The company is well positioned for future growth and success, with a strong international portfolio and a growing EV business.

“Given our shared background in building great businesses, the board and everyone at EG understand Zuber’s desire to return to his entrepreneurial UK roots by acquiring the remaining UK forecourt business including new-to-industry developments and certain standalone food service concessions – as well as dedicating more time to his family and our charitable activities.”

EG Group said it will use the proceeds from the divestment to repay debt, further strengthening its balance sheet following the significant deleveraging and refinancing activity last year.

The group has also today announced the appointment of Russell Colaco as Group Chief Financial Officer. He will succeed Michael Bradley who has decided to step down to pursue other opportunities.

For the 12 months to December 31, 2023, the group delivered revenues of circa $25bn and pro forma EBITDA of $1.1bn with a sustainable capital structure to support investment in future growth.

Skadden, Arps, Slate and Meagher & Flom (UK), Rothschild & Co, EY and PwC supported EG Group on the transaction.

Today, EG Group also released its first quarter figures, to March 31, 2024.

They show underlying EBITDA rose by nine per cent to $178m after strong non-fuel performance and delivery of earnings growth initiatives, and a five per cent growth in gross profit, driven by a strong non-fuel performance

Grocery and Merchandise gross margin grew by 1.7% and gross profit increased by 7.3%, largely driven by coffee and dispensing beverages initiatives in the USA and continued focus on product mix and pricing. Total Grocery & Merchandise sales increased by 1.2%, reflecting good performance in Europe, with new sites maturing across the region.

Foodservice continued to perform well over the quarter, with gross profit up 10% year-on-year, driven by revenue growth and improved margins. Gross margin increased three per cent, as the group continued to focus on pricing in line with rising underlying product costs.

Despite challenging conditions for fuel in some markets, total volumes were broadly in line with Q1 2023 on a like for like basis.

Across the group, revenue declined 2.7% to $5.89bn in Q1, primarily reflecting the impact of disposals in the UK and US.

Key regions of the USA and Europe delivered EBITDA growth and strategic progress.

The sale of the KFC franchise portfolio in the UK&I completed in April 2024, with proceeds being used to repay debt.

The group also said it is making significant progress towards its deleveraging strategy in 2023, with leverage post-committed transactions now at 4.9x. Management remains committed to further deleveraging to achieve 4.5x leverage in the near to medium term.

The brothers said: “Our US strategy provides a blueprint for the group’s global initiatives to improve performance organically. The group also delivered further progress with its deleveraging programme over the quarter, supported post the period end by completing our sale of 216 KFC franchise restaurants to Yum! Brands’ KFC Division and agreeing to divest the group’s remaining UK forecourt business. We remain committed to further reducing leverage to put in place a sustainable long term capital structure.

“We have had an amazing journey together building EG Group over the last 20 years and we both look forward to continuing to work closely together as fellow board members and shareholders in EG Group. The strong progress across the quarter demonstrates our confidence in the growth potential and strategic direction of the business.”

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