Asda Group set to acquire EG Group’s UK and Ireland operations in £2.3bn deal

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British supermarket chain Asda Group has announced the acquisition of convenience and fuel retail company EG Group’s UK and Ireland operations for an enterprise value of £2.27 billion.

The deal, led by the Issa brothers, investment funds managed by TDR Capital LLP, and Walmart, will see Asda bolster its presence in the convenience and fuel retail market.

Under the agreement, Asda will purchase EG Group’s business in the UK and Ireland, comprising approximately 350 petrol filling station (PFS) sites and over 1,000 food-to-go locations.

The acquisition will be executed through a subsidiary of Asda’s parent company, Bellis Acquisition Company 3 Limited. However, EG Group will retain about 30 PFS sites in the UK for broader group development, which will not be part of the transaction.

Asda Group to acquire EG Group's UK and Ireland operations

Asda Group to acquire EG Group’s UK and Ireland operations. Photo courtesy of ASDA.

This strategic combination of Asda and EG UK&I is poised to benefit around 21 million customers per week, with Asda capitalizing on its expanding loyalty scheme. The merger will bring together convenience, fuel, general merchandise, grocery, food service, and omni-channel retailing, while upholding Asda’s commitment to value and customer-centric retail.

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Stuart Rose — Asda Chair said: “Asda’s acquisition of EG UK and Ireland will create a consumer champion like the UK has never seen. Throughout my career in retail – one thing has always been true, that meeting the evolving needs of customers is the route to growth.

“This transaction is all about driving growth by bringing Asda’s heritage in value to even more communities and accelerating the growth of its convenience retail business.”

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Following the completion of the acquisition, Asda has outlined plans to invest over £150m in fully integrating the combined business within the next three years. The shareholders will contribute approximately £450m of additional equity to finance the transaction.

The deal is expected to enhance Asda’s financial profile, with the integration contributing around £195m EBITDA after rents. Moreover, synergies of approximately £100m are projected to be generated over the next three years.

These synergies will primarily stem from economies of scale, increased volumes, and cross-selling opportunities facilitated by the expanded customer base. Asda anticipates over £100m in working capital benefits as a result of its enlarged scale.

The merger between Asda and EG UK&I is seen as a natural progression for both entities, allowing them to leverage their respective strengths and enhance overall performance. The deal is scheduled to close in the fourth quarter of 2023.

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Gary Lindsay — TDR Capital Managing Partner said: “The combination of Asda and EG UK&I creates a convenience and food retailing champion, with nearly £30 billion in annual revenues. The two businesses are highly complementary, bringing together Asda’s traditional focus on mid-to-large sized supermarkets and EG UK&I’s on convenience retail, foodservice and fuel.”

In summary, Asda Group’s acquisition of EG Group’s UK and Ireland operations for £2.27 billion marks a significant development in the convenience and fuel retail sector. Asda aims to leverage this strategic move to better serve its customer base and further strengthen its position in the market.

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