Walmart sells UK grocer Asda for $8.8 billion

  • Walmart has sold its UK grocery chain Asda in an $8.8 billion deal, Asda announced on Friday. 
  • The buyer consortium included private equity firm TDR Capital and Euro Garages owners the Issa brothers.
  • Walmart will retain an equity investment in the business, but TDR Capital and the Issa brothers will acquire a majority ownership stake in Asda.
  • This returns Asda to UK ownership after being owned by Walmart for 21 years.
  • Visit Business Insider's homepage for more stories.

Walmart is handing over its UK grocery business Asda to private equity firm TDR Capital and billionaire brothers Mohsin and Zuber Issa in a £6.8 billion ($8.8 billion) deal, Asda confirmed Friday. 

The billionaire Issa brothers, who own the Euro Garages gas station forecourts chain, and private equity firm TDR Capital will become the majority owners of Asda.

Walmart will retain an equity investment in the business, with an ongoing commercial relationship and a seat on the board.

The acquisition returns Asda, which has been owned by Walmart for 21 years, to UK ownership.

Roger Burnley will remain as CEO of Asda, which is the UK's third-largest grocery chain with more than 600 stores. 

The new owners said they plan to invest more than £1 billion ($1.2 billion) into the business over the next three years, and said they will ensure Asda remains a price leader in the supermarket fuel sector.

The acquisition, if it passes regulatory scrutiny, is expected to pass in the first half of 2021.

But the deal could draw attention from competition regulators because of potential domination of the gas station industry, Andrew Taylor, co-founder of merger and competition advisory firm Aldwych Partners, told Business Insider on Monday.

The UK Competition and Markets Authority (CMA) is "likely" to look into whether the transaction could reduce competition in areas where both Asda and Euro Garages operate, Taylor said. "While the CMA is unlikely to block the deal, it may require some divestments."

Euro Garages owns nearly 6,000 gas forecourts across 10 countries, and recorded $20 billion ($25.8 billion) in revenue in 2019.

"As well as accelerating Asda's existing strategy, the Issa brothers will bring significant additional expertise, particularly in convenience retail and brand partnerships," Asda said in its statement.

Walmart chose the bid over one by US private equity firm Apollo. A third private equity firm, Lone Star, dropped out of the bidding earlier this month.

The news of the acquisition comes less than 18 months after the CMA blocked a merger between Asda and Sainsbury's, the UK's second biggest supermarket, over concerns that it would lead to increased prices in stores, online, and at gas stations. The regulator also feared the deal would worsen the quality and range of products. 

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