British billionaire Issa brothers and private equity group TDR Capital have agreed to buy the supermarket chain Asda from Walmart for an enterprise value of £6.8 billion and plan to roll out more smaller stores.
The deal will enable British Asians Mohsin and Zuber Issa, who founded petrol station operator EG Group nearly two decades ago, to take Asda back under British ownership for the first time since 1999, when Walmart paid £6.7bn for the business.
The new owners want to drive growth at Britain’s third-biggest supermarket chain by expanding its presence into smaller neighbourhood shops to add to its large supermarket format, bringing it more in line with competitors Tesco and Sainsbury’s which offer both.
Walmart will retain an unspecified equity investment in the business, an ongoing commercial relationship and a seat on the board, while British retail veteran Roger Burnley will remain in charge at Asda.
“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,” the brothers said.
The new owners will invest more than £1bn in the next three years in Asda to keep prices low and to protect its supply chains.
Chancellor Rishi Sunak welcomed the deal for Asda which will retain its headquarters in Leeds.
“The new owners have already committed to investing over one billion pounds ($1.3 billion) in the next three years and increasing the proportion of UK-based suppliers,” he said. “I wish them the best of luck.”
Britain’s highly competitive supermarket sector has been upended this year by the Covid-19 crisis which sparked a jump in sales – and costs – as shoppers stocked up on goods during lengthy lockdowns.
While Asda’s sales increased, the chain still lagged market leader Tesco, Sainsbury’s, and smaller rival Morrisons.
All of the so-called big-four supermarket chains have also faced fierce competition from German discounters Aldi and Lidl in recent years.
In response, Walmart previously sought to sell Asda to Sainsbury’s for £7.3bn but the deal was thwarted by Britain’s competition regulator last year.
The lower price announced today (2) reflects the integration benefits that a merged Asda-Sainsbury’s would have produced.