Asda Group has today announced the acquisition of EG Group’s UK and Ireland operations for an enterprise value of c.£2.27bn – bringing Asda’s heritage as a consumer champion to even more customers and accelerating its growth strategy in convenience, omni-channel retail and foodservice.
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 it says, 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
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.”
