ASDA TO ACQUIRE EG GROUP’S UK AND IRELAND BUSINESS

Deal will allow EG Group to expand further in U.S., other markets, it says

In a deal combining two major U.K. grocery and convenience retailers, EG Group has agreed to sell the majority of its U.K. and Ireland fuel

foodservice, grocery and merchandise business to Asda for an enterprise value of $2.82 billion.

Blackburn, U.K.-based EG Group, which owns the Cumberland Farms and other U.S. convenience-store chains, as well as additional chains globally, will continue to operate separately in the United States, Australia, Germany, France, Italy, the Netherlands, Luxembourg and Belgium.

EG Group will use the proceeds of this transaction, together with the net proceeds of $1.4 billion from the recent sale-leaseback transaction involving Cumberland Farms in the United States, to repay debt in line with its financial policy and deleveraging strategy, it said.

Mohsin and Zuber Issa, founders and co-CEOs of EG Group, also own Asda. They began exploring a combination of the two businesses in late 2021. Mohsin Issa will continue to lead Asda while it commences a search for a new group CEO.

Asda, with investment funds managed by TDR Capital LLP and Walmart, is acquiring the EG UK and Ireland business consisting of approximately 350 gas station sites and more than 1,000 food-to-go locations through Bellis Acquisition Co. 3 Ltd., a subsidiary of the Asda Group. EG Group will retain approximately 30 gas station sites in the U.K. for wider group development and which will not be part of the transaction.

“The combination of Asda and EG UK&I creates a convenience and food retailing champion, with nearly $37.27 billion in annual revenues,” said Gary Lindsay, managing partner at TDR Capital, London. “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.”

He added, “The sale of the EG UK&I business to Asda makes strategic sense for both parties and will enable EG Group to accelerate its growth in key markets including Europe, the U.S. and Australia.”

Asda will fund the transaction through a combination of debt and equity, including approximately $559.24 million of equity from shareholders, $956.76 of term loan debt, as well as approximately $1.37 billion from property-related transactions.

Following completion of the transaction, Asda plans to invest more than $186.53 million in the next three years to fully integrate the combined business. As part of the transaction the shareholders are providing $559.53 million of additional equity to fund the transaction. The companies expect the transaction to close in fourth-quarter 2023.

The deal accelerates the companies’ growth strategy in convenience, omnichannel retail and foodservice. “The enlarged group will be better placed to benefit from highly attractive structural drivers behind the convenience and foodservice markets,” they said.

The “transformational combination” will allow Asda to better serve a combined base of about 21 million customers each week, as well as leveraging Asda’s growing loyalty scheme and bringing together convenience, fuel, general merchandise, grocery, foodservice and omnichannel retailing under Asda’s retail brand.

“Asda is committed to saving customers precious time and money across their shopping baskets and on the forecourt,” Mohsin Issa said. “The combination of Asda and EG UK&I will be positive news for motorists, as we will be able to bring Asda’s highly competitive fuel offer to even more customers.”

He added, “Following this sale, EG Group will benefit from a significantly strengthened balance sheet, supporting the continued roll out of its successful convenience retail, fuel and foodservice strategy and drive innovation to transform the consumer experience.”

The transformation includes the ongoing investment and expansion of the company’s EV charging business, evpoint, as well as hydrogen and other sustainable fuel retail infrastructure, which it continues to see as a significant opportunity, Mohsin Issa said.

With headquarters in Leeds, Asda is the U.K.’s third-largest supermarket by market share with more than 640 stores. Its primary operations include the sales of groceries, clothing, general merchandise and fuel. The launch of Asda Express in 2022 formed part of Asda’s long-term strategy to become the UK’s second largest supermarket by establishing a presence in the fast-growing convenience-store sector.

• EG America is No. 5on CSP’s 2023 Top 40 update to the 2022 Top 202 ranking of c-store chains by number of company-owned retail outlets. Watch for the full 2023 list in the June issue ofCSP magazine and atCSPDailyNews.com.

Founded in 2001 as EuroGarages by co-CEOs Moshin and Zuber Issa, Blackburn, U.K.-based EG Group is a c-store operator and fuel retailer with more than 6,200 sites across the United Kingdom and Ireland, Europe, the United States and Australia. In 2021, the Issas and London-based TDR Capital acquired Asda Walmart’s U.K. supermarket business. EG Group established itself in the United States in 2018 as EG America by acquiring Kroger’s 762-site c-store network. It acquired TravelCenters of America’s Minit Mart c-store business for approximately $330.8 million in 2018. The portfolio included 225 c-stores. And in 2019, among other acquisitions, EG Group acquired Cumberland Farms and its nearly 660 c-stores in the Northeast and Florida, and EG America now has its headquarters in Westborough, Mass. With more than 1,750 sites across 33 states, U.S. c-store brands include Cumberland Farms, Certified Oil, Fastrac, Kwik Shop, Loaf N’ Jug, Minit Mart, Quik Stop, Sprint Food Stores, Tom Thumb and Turkey Hill.