Asda completes £2bn acquisition of EG Group’s UK business to expand into convenience and foodservice

Asda Group has announced the completion of acquiring EG Group‘s UK business for an enterprise value of £2.07 billion, marking a major strategic step in growing its convenience and foodservice offerings. This acquisition accelerates Asda’s reach, bringing their value pricing model to millions more across the UK.

Expanding Asda’s Reach Through Strategic Acquisitions

The purchase of EG UK’s 356 sites, predominantly freehold and featuring modern convenience stores at petrol filling stations, is crucial to Asda’s plan for expanding its Asda Express brand. This deal complements the earlier acquisition of 119 convenience sites with attached PFS from the Co-op Group, augmenting Asda’s presence in the convenience store sector.

Major retail shift as Asda buys EG Group’s UK business, eyeing growth in UK market. Photo courtesy of ASDA.

Asda’s Growing Portfolio and Long-term Ambitions

Following these acquisitions, Asda now owns 478 convenience stores, with plans to open 300 more by 2026. This expansion bolsters its existing network of 580 supermarkets, 31 Asda Living stores, and 321 PFS sites. The initiative underscores Asda’s ambition to become the UK’s second-largest supermarket, diving into the lucrative £62bn foodservice market with added franchises like Greggs, Burger King, Subway, and Leon.

Industry Impact and Customer-Centric Strategies

Chair of Asda, Lord Stuart Rose, emphasized the acquisition’s role in delivering value to communities, especially amidst cost-of-living challenges. He highlighted Asda’s commitment to affordability through various consumer-focused initiatives. Co-owner Mohsin Issa stressed the transaction’s alignment with lowering fuel prices and expanding value and quality offerings.

Enhanced Group Dynamics and Future Outlook

This acquisition creates a combined group with projected revenues nearing £28bn and serving around 21 million customers weekly. It signifies a unification of convenience, fuel, grocery, foodservice, and omni-channel retailing under Asda’s established value-centric approach. Gary Lindsay from TDR Capital LLP notes that this growth-focused transaction will propel Asda towards regaining its position as the UK’s number two supermarket, delivering enhanced value to customers.

Financial Insights and Governance

The revised acquisition price, reflecting mutual adjustments, ensures Asda’s enhanced business profile with an expected £250m increase in annual EBITDA post-synergies. The Board, including Lord Stuart Rose and Dame Alison Carnwath, along with Directors Mohsin Issa and Gary Lindsay, continues to strengthen Asda’s leadership team and strategic direction.

Asda’s bold move into the EG Group’s UK business heralds a transformative era for the retailer, with a keen eye on market leadership and customer value. This expansion not only reinforces Asda’s position in the retail sector but also sets a new benchmark in convenience and foodservice offerings, reshaping the UK’s grocery and convenience store landscapes.