Walmart to sell majority stake in Asda for $8.8 billion

Walmart plans to sell majority ownership in Asda Group Ltd., its United Kingdom grocery subsidiary, to EG Group founders the Issa brothers and U.K. private-equity firm TDR Capital in a deal valued at £6.8 billion ($8.79 billion).

Bentonville, Ark.-based Walmart said Friday that it will retain an equity stake in Asda, with an ongoing commercial relationship and a seat on the supermarket chain’s board.

Asda will continue to be headquartered in Leeds, England, and led by current CEO Roger Burnley, who serve on Asda’s board with representatives named by the Issa brothers, TDR Capital and Walmart.

Pending regulatory approvals, the transaction is expected to close in the first half of 2021, the companies said.

The deal comes nearly a year-and-a-half after U.K. regulators, citing antitrust issues, rejected an agreement by Walmart to sell Asda to rival J Sainsbury plc for £7.3 billion ($9.4 billion). Walmart and Sainsbury announced the sale in April 2018, but the U.K.’s Competition and Markets Authority (CMA) raised competitive concerns with the proposed Asda-Sainsbury’s merger in February 2019 before blocking the transaction two months later.

“We are delighted to be able to announce this deal today, which we believe creates the right ownership structure for Asda, building on its 71 year-heritage, whilst bringing a new entrepreneurial flair, not only to Asda, but also to U.K. retailing,” Walmart International President and CEO Judith McKenna said in a statement on Friday. “I’m delighted that Walmart will retain a significant financial stake, a board seat, and will continue as a strategic partner. Asda has been a powerhouse of innovation for the rest of the Walmart world, and we look forward to continuing to learn from them in the future. This important combination will continue to keep customers and colleagues at Asda’s heart, which is important to us all.”

Related:Asda-Sainsbury $9 billion UK supermarket deal blocked

With 146,000 employees, Asda has a retail network encompassing 584 grocery stores, 18 freestanding gas stations and 33 Asda Living stores, as well as e-commerce websites. The company also operates George, a U.K. apparel retailer with brick-and-mortar and online stores.

Walmart acquired Asda in 1999 for £6.7 billion ($10.8 billion). The retail giant’s foray into the U.K. grocery market triggered price wars that later became more aggressive with the entry of deep discount grocers Aldi and Lidl, which impacted the value play driven by Asda and squeezed profit margins.

Mohsin and Zuber Issa and TDR Captial, Asda’s prospective new owners, plan to invest £1 billion ($1.29 billion) over the next three years to bolster the retailer’s business and supply chain, as well as accelerate its omnichannel transition and continue its low-price market strategy.

Related:Walmart to sell Asda subsidiary to Sainsbury’s

“This new ownership opens an exciting new chapter in Asda’s long heritage of delivering great value for U.K. shoppers. With our combined investment, expertise and ambition, Asda, Walmart, the Issa brothers and TDR have an incredible opportunity to accelerate our existing strategy and develop an even more exciting offer for our customers as well as strengthen our business for our colleagues,” Burnley stated. “In a constantly changing retailing environment, our new ownership will further enhance our resilience, whilst creating significant, additional opportunities to drive growth.”

The Issa brothers serve as co-CEOs of Blackburn, England-based EG Group, a convenience retailer with more than 6,000 grocery and merchandise, foodservice and fuel locations across North America, Europe and Australia. The company, part-owned by TDR Capital, entered the U.S. market in April 2018 with the $2.15 billion acquisition of The Kroger Co.’s convenience retail business, which totaled 762 stores.

“We are very proud to be investing in Asda, an iconic British business that we have admired for many years. Asda’s customer-centric philosophy, focus on operational excellence and commitment to the communities in which it operates are the same values that we have built EG Group on. Asda’s performance through the COVID-19 pandemic has demonstrated the fundamental strength and resilience of the business, and we are excited to support Roger [Burnley] and his team as they continue to reposition the business to drive long-term growth,” Mohsin and Zuber Issa said in a statement.

“We believe that our experience with EG Group, including our expertise around convenience and brand partnerships and our successful partnership with TDR Capital, can help to accelerate and execute that growth strategy,” they added. “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 U.K.”