Dive Brief:
- After months of speculation, EG Group has agreed to sell the majority of its c-store and fueling business in the U.K. and Ireland to sister supermarket company Asda for $2.8 billion, according to a Tuesday announcement.
- The deal includes over 1,000 “food-to-go” locations as well as 350 fueling stations, with EG expected to retain about 30 fueling sites in the U.K. The agreement has already been approved by Asda’s board and is expected to close in the fourth quarter of 2023.
- Offloading these sites is a means for EG to repay debt, helping bring its leverage ratio to “below 5 times” once the deal closes, according to the announcement. This coincides with EG’s sale-leaseback agreement to sell up to 415 U.S. properties to Realty Income Corporation, with some of those properties having begun to transfer ownership last week.
Dive Insight:
Initial reports of EG and Asda’s merger came in January, and by late March, the two companies were reportedly “racing to complete” the deal as EG looked to repay or refinance nearly $9 billion of debt.
The transaction will be funded by a combination of debt and equity, including over $1.3 billion from property-related transactions, $957 million of term loan debt and $559 million of equity from its shareholders, according to the announcement.
Under leadership of the Issa brothers and private equity partner TDR Capital, the combined group creates a c-store and fuel operator with around $37 billion in annual revenues, according to the announcement. Once the deal closes, Asda plans to invest more than $186 million within the next three years to fully integrate the combined business.
“Following this sale, EG Group will benefit from a significantly strengthened balance sheet, supporting the continued roll out of its successful convenience retail, fuel and foodservice strategy and drive innovation to transform the consumer experience,” Zuber Issa, co-founder and co-CEO of EG Group, said in the announcement.
Beyond growing its footprint, the deal will allow Asda to grow its loyalty efforts by blending convenience, fuel, general merchandise, grocery, foodservice and omni-channel retailing, according to the announcement. The move will also allow EG to accelerate its electrification strategy, with plans to deploy its proprietary EV Point chargers across the combined network.
The Issa brothers acquired Asda in 2021, and have since converted 166 EG sites to the "Asda on the Move" format. Additionally, since October, Asda has acquired 119 c-stores with fueling stations from the Co-Op Group and launched three standalone Asda Express c-stores.
Asda co-owner Mohsin Issa will continue to lead the supermarket company while Asda begins a formal search for a new CEO, according to the announcement. This process is expected to take several months.
EG Group currently has more than 6,600 sites across the U.S., U.K. and Ireland, Europe and Australia. The retailer will continue operating out of its global headquarters in Blackburn, U.K., once the merger closes.
