British supermarket group Asda has announced the acquisition of EG Group’s UK and Ireland operations for an enterprise value of c.£2.27bn.
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Asda, owned by the Issa brothers, investment funds managed by TDR Capital and Walmart, is acquiring the EG UK and Ireland business consisting of c. 350 petrol filling station (“PFSâ€) sites and over 1,000 food-to-go locations – through an affiliate of its parent company, Bellis Acquisition Company 3 Limited, a wholly-owned subsidiary of the Asda Group.
EG Group will retain approximately 30 PFS sites in the UK for wider group development and which will not form part of the transaction.
The transformational combination of Asda and EG UK&I will allow Asda to better serve a combined base of around 21m customers each week, as well as leveraging Asda’s growing loyalty scheme and bringing together convenience, fuel, GM, grocery, foodservice and omni-channel retailing under Asda’s heritage in value and ‘customer first’ retail.
Following completion of the transaction, Asda plans to invest more than £150m within the next three years to fully integrate the combined business. As part of the transaction the shareholders are providing c. £450m of additional equity to fund the transaction.
The acquisition will strengthen Asda’s financial profile with the contribution of c. £195m EBITDA after rents, with additional P&L synergies of c. £100m expected to be generated over the next three years.
Asda also expects to realise over £100m of working capital benefits as a result of its enlarged scale.
The transaction will be funded by a combination of debt and equity, including c. £450m of equity being provided by the shareholders, £770m of term loan debt, as well as c. £1.1bn from property related transactions.
Asda also today reported strong like-for-like sales growth and market share gains from the traditional ‘big four’ competitors, as its investments in value and quality continue to resonate with customers.
Like-for like sales increased by 7.8% in the three months to the end of March compared with the previous year, while total revenues excluding fuel increased by 8% to £5.0bn. ■