Asda to add more convenience stores after EG Group dealon May 30, 2023 at 10:06 am

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The takeover of EG Group assets combines two businesses already owned by the billionaire Issa brothers.

Asda Express storeImage source, Asda

Asda is to step up its expansion into the convenience food sector after buying the UK and Ireland business of petrol station giant EG Group for £2.27bn.

The deal brings together two businesses that are already owned by the billionaire Issa brothers.

EG has about 350 petrol stations and more than 1,000 food-to-go locations.

The newly-combined company will have revenues of nearly £30bn and employ about 166,000 people.

Asda chairman Stuart Rose said: “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.”

There are already 166 Asda “On the Move” convenience stores, which have been rolled out on EG sites since the Issa brothers bought the supermarket in 2021. All EG sites in the UK and Ireland will now be rebranded under the Asda name.

Asda co-owner Mohsin Issa said the combination would be “positive news for motorists, as we will be able to bring Asda’s highly competitive fuel offer to even more customers”.

Asda – which is the UK’s third largest supermarket – already has 438 petrol stations, including 129 forecourts that Asda bought from the Co-op last year in a £600m deal.

The Competition and Markets Authority (CMA) is currently investigating all supermarkets over high food and fuel prices.

The competition watchdog is looking at whether a “failure in competition” means customers are overpaying, despite claims by supermarkets that they are working to keep food prices “as low as possible”.

A separate investigation into the fuel market has found some supermarkets have increased margins on petrol and diesel.

At the weekend it emerged that the government is in talks about asking supermarkets to cap prices on basic food items to help tackle the rising cost of living.

However, speaking to reporters Mr Rose said “you can’t interfere” in the food retail market, adding that the government should let shopkeepers do what they do well.

He also said shoppers will not see “higher prices as a result of this [EG] transaction”.

Zuber and Mohsin Issa

Image source, EG Group

Asda said it planned to invest more than £150m over the next three years to fully integrate the two businesses.

It also says it hopes to make savings of about £100m in the next three years, by taking advantage of the size of the new group, and through “higher volumes and cross-selling opportunities from a large and highly complementary customer base”.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said the idea behind the tie-up was that “by being super-competitive on petrol, Asda may win more grocery custom from rivals at a time when grocery top-ups are all the rage, rather than dedicated weekly shops”.

“But while the cost-of-living crisis rages… the search for value may be prioritised over convenience for the foreseeable future,” she added.

Retail analyst Richard Hyman predicted job cuts at a senior level would follow.

“It was inevitable the Issa brothers would want to consolidate assets they already own,” Mr Hyman said. “The only reason they’ll be doing this is to cut costs.”

Zuber Issa, co-founder and co-chief executive of EG Group, said the Asda deal was “an important strategic step for EG Group”.

“Following this sale, EG Group will benefit from a significantly strengthened balance sheet,” he said in a statement.

EG said proceeds from the sale of its UK and Ireland business to Asda, together with $1.4bn (£1.1bn) raised from the US deal, would be used to pay down its debts.

The tie-up between Asda and EG has been expected for some time, and ahead of the deal being announced the GMB union called for it to receive “proper scrutiny” by the CMA.

GMB national officer Nadine Houghton said the union was concerned that rising interest rates would saddle Asda with “unsustainable” levels of debt.

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