THE owners of supermarket Asda and petrol stations company EG Group will announce a £10 billion merger of their operations, Sky News reported.
Asda, Britain’s third-largest grocer, and EG are both owned by brothers Zuber and Mohsin Issa and private equity group TDR Capital.
According to the report, the announcement is expected on Friday (26).
In January this year, The Sunday Times reported talks about a possible merger.
The entirety of EG Group, which also operates in the US and Australia, ended 2022 with net debt of £7.8bn, while Asda ended the year with debt of £4bn.
The report said that the merged group will operate nearly 600 supermarkets, 700 petrol forecourts and 100 convenience stores and have revenue close to £30bn.
Banking sources told Sky News that Apollo Global Management is set to offer over £500m of private placement debt to finance the acquisition of Asda by EG UK.
Apollo was one of the top contenders in the sale of Asda from Walmart in 2020. The deal, which is expected to generate synergies of over £100m, will involve lenders such as Barclays and HSBC, with Barclays also providing advisory services alongside Rothschild.
The combined group will own commercial real estate assets worth more than £9bn, while approximately £7bn of EG’s debt is scheduled to be repaid in 2025.
The £1.25bn acquisition of EG UK by Asda will establish one of the largest private sector employers in the UK.
It said the deal would accelerate Asda’s drive into the convenience store sector.
Asda, which trails market leader Tesco and Sainsbury’s, has a 13.9 per cent share of Britain’s grocery market, according to researcher Kantar.
Its stated goal is to overtake Sainsbury’s and become Britain’s No. 2 grocer. Sainsbury’s has a 14.8 per cent share. In March, Asda reported a 24 per cent fall in annual earnings.
Competition watchdogs have already scrutinised the implications of Asda and EG being controlled by the same shareholders when the acquisition happened three years ago.
Following the Asda-EG transaction, EG UK will maintain its headquarters in Blackburn, Lancashire, while Asda will continue to be based in Leeds, Yorkshire.
