LEEDS, UK – Asda Group has today announced the acquisition of EG Group’s UK and Ireland operations for an enterprise value of c.£2.27bn (US$2.8 billion) – bringing Asda’s heritage as a consumer champion to even more customers and accelerating its growth strategy in convenience, omni-channel retail and foodservice. The transaction also includes the restaurant and coffee chain Leon that EG Group acquired in 2021.
Asda, owned by the Issa brothers, investment funds managed by TDR Capital LLP and Walmart (the “Shareholders”), is acquiring the EG UK and Ireland business consisting of c. 350 petrol filling station (“PFS”) sites and over 1,000 food-to-go locations – through an affiliate of its parent company, Bellis Acquisition Company 3 Limited, a wholly-owned subsidiary of the Asda Group. EG Group will retain approximately 30 PFS sites in the UK for wider group development and which will not form part of the transaction.
The transformational combination of Asda and EG UK&I will allow Asda to better serve a combined base of around 21m customers each week, as well as leveraging Asda’s growing loyalty scheme and bringing together convenience, fuel, GM, grocery, foodservice and omni-channel retailing – under Asda’s heritage in value and ‘customer first’ retail.
Following completion of the transaction, Asda 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 acquisition will strengthen Asda’s financial profile with the contribution of c. £195m EBITDA after rents, with additional P&L synergies of c. £100m expected to be generated over the next three years. These synergies mainly arise through economies of scale of the combined entity, higher volumes and cross-selling opportunities from a large and highly complementary customer base. Asda also expects to realise over £100m of working capital benefits as a result of its enlarged scale.
The combination of Asda and EG UK&I is a natural next step for both businesses. The enlarged group will be better placed to benefit from highly attractive structural drivers behind the convenience and foodservice markets, estimated by Euromonitor to be worth c. £40bn and c. £62bn, respectively, in 2022 Four key drivers are:
- The rise of local shopping as consumers adapt to hybrid work patterns
- Consumers shopping for immediate consumption and same day meals, topping up their weekly shops
- Convenience stores being located at the heart of communities, offering a range of value-added services that drive footfall
- Consumers increasingly prioritising food to go and takeaway options due to busy lifestyles
Stuart Rose, Chair of Asda, 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.”
Mohsin Issa, co-owner of Asda, said:
“Asda is committed to saving customers precious time and money across their shopping baskets and on the forecourt. The combination of Asda and EG UK&I will be positive news for motorists, as we will be able to bring Asda’s highly competitive fuel offer to even more customers.
“I would like to sincerely thank all colleagues at both businesses for their ongoing efforts to serve our customers during tough economic times, and I look forward to welcoming our new colleagues from EG UK & I and expanding the Asda family further.”
Gary Lindsay, Managing Partner at TDR Capital LLP, said: “The combination of Asda and EG UK&I creates a convenience and food retailing champion, with nearly £30 billion in annual revenues. The two businesses are highly complementary, bringing together Asda’s traditional focus on mid-to-large sized supermarkets and EG UK&I’s on convenience retail, foodservice and fuel.
“At TDR Capital we’re proud to play our part in bringing the businesses together. We invest for the long term and this transaction is the realisation of a shared vision which began with our investment in EG in 2016. We are committed to help Asda reclaim its number two position in UK grocery, strengthening its position as a much-loved British brand that delivers great value to millions of customers every week.”
The transaction is expected to close in Q4 2023.