retail

Asda takeover: TDR-backed EG Group in pole position for £6.5bn deal


The billionaire owners of the British petrol forecourts operator EG Group have taken pole position in the £6.5bn race for control of Asda after being named the preferred bidder by the supermarket’s US owner.

Mohsin and Zuber Issa, who are working with the private-equity firm TDR Capital, have pushed out a rival offer from the private-equity firm Apollo Global Management.

Sources suggested EG Group had been able to edge ahead because of the potential for the two businesses to work together on expanding Asda into petrol forecourts.

The TDR-backed deal was thought likely to prove less attractive to Asda and its parent group, Walmart, as it could lead to attention from competition regulators and potentially a lengthy inquiry.

Regulators blocked Walmart’s earlier attempt to quit the UK by merging Asda with Sainsbury’s.

Apollo, which is working with the retail veteran Rob Templeman, the former boss of Debenhams, was thought to be planning a more straightforward deal based on expanding Asda’s online presence.

It is understood that Apollo has yet to be formally informed that they have not won preferred bidder status and could yet fight back with a new offer.

However, its deal may have attracted criticism over its reliance on raising debt.

A third bid, from the private-equity firm Lone Star Funds, fronted by the former Asda and Somerfield executive Paul Mason, was dropped last week as it could not match the price being offered by its rivals.

Walmart restarted talks on the sale of a stake in its UK arm in July, 15 months after the collapse of the planned merger with Sainsbury’s. A deal is expected to be announced as early as this week.

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Hammering out details may take longer as bidders wrangle over potential liabilities including Asda’s pension scheme and an equal pay dispute being considered by the UK supreme court, which could cost billions of pounds in back pay.

Talks involving Lone Star and Apollo and TDR Capital were paused in April after the coronavirus pandemic reached the UK.

Walmart, which bought Asda in 1999, is expected to retain a minority stake in the supermarket as part of the deal.

The group is thought to want to float Asda on the stock market but that ambition could take some time, given the volatility of markets as the coronavirus pandemic rages on. It views a private-equity deal as a way to secure new investment in Asda in preparation for any initial public offering.



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