Asda’s billionaire owners the Issa brothers are ‘racing’ to complete a £12bn merger of the supermarket chain and their UK petrol forecourts business by the end of April.
According to reporting in The Times, the plan is to merge Asda and EG Group‘s UK division as part of ongoing efforts to reduce the £7bn debt burden across the forecourt empire.
As joint owners of both businesses the Issa brothers and TDR Capital are expected to structure the deal as an Asda takeover of EG UK. The move will significantly increase the supermarket groups‘s existing debt, which currently stands at £4.7 billion.
A successful deal would create a vast retail group comprised of 581 supermarkets, 700 petrol forecourts and more than 100 convenience stores.
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By combining two profitable, cash-generating businesses, the hope is that EG Group – which needs to refinance £7 billion of debt by 2025 – will be able to do so on better terms.
Over 100 Asda On The Move convenience stores have already been opened on EG forecourts across the UK, but talks of a merger between Asda and EG Group first came to light in January.
“Obviously, they think it’s a good idea to put the businesses together, but it’s a matter of getting it done,” a City source told The Times.
EG Group announced a deal for the sale and leaseback of 415 US stores worth $1.5 billion (£1.2 billion) earlier this month, as part of the ongoing efforts to bring down the Group’s debt burden amid soaring interest rates soar.
The company made $1.46 billion in underlying profits on $33 billion in sales last year, while Asda made £1.32 billion on £23.5 billion in sales.
Lord Rose, the former chief executive of Marks & Spencer, is likely to lead the combined group. The transaction is being advised by bankers from Rothschild, Barclays, and JP Morgan.
