Asda has announced plans to acquire the majority of EG Group’s UK and Ireland petrol station business, in an effort to accelerate its expansion into the convenience sector. The acquisition will result in a combined revenue of approximately 30 billion pounds ($38 billion).
According to Reuters, Asda and EG, owned by Zuber and Mohsin Issa and TDR Capital, have a unit consisting of approximately 350 petrol stations and over 1,000 food-to-go locations valued at 2.27 billion pounds.
Asda has partnered with EG to expand its convenience format, Asda Express, across the EG petrol estate. The deal will aid Asda in surpassing Sainsbury’s and becoming the second-largest supermarket in Britain, while EG will use the proceeds to pay off its debt.
Asda chairman Stuart Rose stated that the transaction aims to increase growth by leveraging Asda’s reputation for value and expanding its convenience retail business to new communities.
The funding for the deal will consist of 450 million pounds of equity from Asda’s shareholders, including its former owner Walmart, as well as 770 million pounds of term loan debt and approximately 1.1 billion pounds from property-related transactions, such as the sale and leaseback of certain stores.
According to Rose, raising debt was not a problem and current bondholders were satisfied with the structure of the agreement, as it did not significantly increase Asda’s leverage ratio of approximately 4.3 times after accounting for finance leases and ground rent liabilities.