Walmart sells majority stake in Asda

Published on
October 6, 2020

Walmart is selling its majority stake in U.K. grocery chain Asda for GBP 6.8 billion (USD 8.8 billion, EUR 7.5 billion).

The Issa brothers, founders and co-CEOs of EG Group, a global convenience and forecourts retailer in Blackburn, U.K., and investment funds managed by TDR Capital LLP, are acquiring Asda, the companies said in a press release.

The Issa brothers and TDR Capital are acquiring a majority ownership stake in Asda, while Walmart will retain an equity investment in the business, with an ongoing commercial relationship and a seat on the board.

“At a time of evolution in the U.K. food retail sector, the new owners will continue to build a strong and successful business, benefiting from fresh capital and expertise, as well as valuable links with the world’s largest retailer,” the companies said. “Asda will continue to work closely with suppliers to provide best value ranges for customers in the categories that matter most to them.”

Asda has struggled to defend its market share against large U.K. supermarket chains and German discounters Aldi and Lidl, Bloomberg reported, and the new ownership faces the same problems, according to analysts.

“The deal raises more questions than answers,” Clive Black, a retail analyst at Shore Capital, told Bloomberg. “Whether or not the raw entrepreneurship and ambition of the Issas is enough to drive greater same-store sales and cash flows per square foot on a sustained basis remains to be seen.”

However, Asda has “demonstrated huge resilience during the COVID-19 pandemic, almost doubling its online operations in a matter of months,” the companies said.

“With support from its new ownership, Asda will continue to invest in accelerating its omnichannel offer and in the resilience of its supply chain, including sourcing more food from U.K. farmers and maintaining its commitment to supporting domestic suppliers and small businesses,” they said.

Under its new owners, the business will invest more than GBP 1 billion (USD 1.3 billion, EUR 1.1 billion) in Asda over the next three years to “further strengthen the business and its supply chain.”

“We believe that our experience with EG Group, including our expertise around convenience and brand partnerships and our successful partnership with TDR Capital, can help to accelerate and execute that growth strategy," Mohsin and Zuber Issa said. "After a successful period as part of Walmart we are looking forward to helping Asda build a differentiated business that will continue to serve customers brilliantly in communities across the UK."

Asda will remain headquartered in Leeds and will continue to be led by CEO Roger Burnley, who will form part of Asda’s board, alongside representatives appointed by the Issa brothers, TDR Capital, and Walmart.

Photo courtesy of TreasureGalore/Shutterstock

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