Blackburn’s Billionaire Brothers: Asda Bought from Walmart in billion-pound deal

October 14, 2020

3 min read

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What's going on here?

Two self-made billionaire brothers have bought Asda from American retail giant Walmart for £6.8bn, returning the company to majority British ownership for the first time in 21 years.

What does this mean?

Asda, which accounts for 15% of the UK’s grocery market, is now back under British ownership for the first time since 1999. The buyers set to accelerate the supermarket’s growth are brothers Mohsin and Zuber Issa, who built their billion-pound success over 20 years ago from a petrol station in Bury, and now own EG Group (formerly Euro Garages), with over 6,000 petrol stations across 10 countries. Along with private equity firm TDR Capital, the Blackburn-born brothers, who specialise in convenience and brand partnership, show promising potential as new owners. They beat out accomplished private equity firms Apollo Global Management and Lone Star for the sale, and gained the support of impressive lenders, such as Barclays and Morgan Stanley.

Talk of Walmart selling a majority stake in Asda resumed this July, following a brief pause due to the pandemic. This came 15 months after plans to merge with rival grocer, Sainsburys, failed after the Competition and Markets Authority predicted higher prices and reduced quality and choice, had the £13bn merger gone ahead. Selling a majority stake proved a better option to help Asda advance, and the sale was made official on 2 October 2020, with law firms Skadden and Latham & Watkins advising the buyers, and Slaughter and May aiding Walmart.

What's the big picture effect?

Being among the few places permitted to remain open during lockdown, it’s safe to say that supermarkets have seen plenty of change throughout 2020. While profits have declined in some areas, closure of restaurants and cafés alongside the shift to working from home has caused in-store and online supermarket sales to surge. Walmart hopes the new buyers can further accelerate the business, and create “significant, additional opportunities for growth”. As a result, the brothers plan to invest a whopping £1bn over the next 3 years, with the aim to enhance Asda’s online presence and convenience operations. The pandemic has seen shoppers keen to do multiple shops in a single trip, and online sales have doubled. Subsequently, they are trialling 3 “Asda on the Move” convenience stores at EG Group petrol forecourts, where customers can “shop within a shop” (similar to Argos concessions in Sainsburys), and though currently a separate deal, we may see more of this should the trial prove successful.

With new owners, and competition already fierce, supermarket customers can expect to see the same or even lower prices, particularly online. With rising living costs, this is great news, though keeping prices low may present further challenges amid tough economic conditions and potential tariffs on EU imports. However, according to Asda CEO, Roger Burnley, who will maintain his role, the company’s new ownership is committed to supporting more UK suppliers, which is particularly welcome with current prospects of a declining economy.

Overall, the brothers have big plans for their new billion-pound purchase. The potential growth of convenience stores, British produce, and their online presence may see Asda closing the gap between them and rival Tesco. Whilst it is still early days, it is clear that the combination of expertise, encapsulating Walmart’s commercial knowhow, EG Group’s convenience experience, and the brothers’ raw entrepreneurship, ambition, and knowledge of the average British shopper, may give them the edge they need to take the top spot among the supermarkets.

Report written by Lotanna Okaro

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