Asda Group has announced its 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, omnichannel retail and food service.
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 approximately 350 petrol filling station (“PFS”) sites and over 1,000 food-to-go locations through an affiliate of its parent company, Bellis Acquisition Company three Limited, a wholly-owned subsidiary of the Asda Group. EG Group will retain approximately 30 PFS sites in the UK for broader group development, which will not form part of the transaction.
The transformational combination of Asda and EG UK&I will allow Asda better to serve a combined base of around 21 million customers each week, as well as leveraging Asda’s growing loyalty scheme and bringing together convenience, fuel, GM, grocery, food service and omnichannel retailing, under Asda’s heritage in value and ‘customer first’ retail.
After completing the transaction, Asda plans to invest more than £150 million within three years to integrate the combined business fully. As part of the transaction, the shareholders are providing approximately £450m of additional equity to fund the transaction.
The acquisition will strengthen Asda’s financial profile with the contribution of £195m EBITDA after rents, with additional P&L synergies of approximately £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. Due to its enlarged scale, Asda also expects over £100m of working capital benefits.
