Asda is finalizing a deal to buy UK and Ireland sister company EG Group’s petrol yards in a deal worth £3bn, allowing the supermarket to ramp up its shift into convenience retail.
The companies are expected to formally announce the long-awaited partnership in the next few days, which will create a combined business worth around £10 billion.
The two groups are owned by the billionaire brothers Essa and the private equity firm TDR Capital, and are headed by former Marks & Spencer chief Stuart Rose.
Asda is expected to pay about 3 billion pounds to buy Egypt, backed by about 500 million pounds from the credit arm of US investment firm Apollo Global Management.
The proceeds will help Egypt reduce its onerous debt burden, according to Sky News, which first reported on the timing of the merger.
Talks over a potential deal have been going on for months, as the cost of servicing billions of pounds of debt held by Egypt has soared after a wave of interest rate hikes.
Some £7 billion of Egypt’s debt is said to be due to be repaid in 2025, adding pressure to businesses, while Asda has also been squeezed by rising energy costs, wages and its products – as well as a tough consumer market as households grapple with the rapidly rising cost of living. .
The new group will operate approximately 600 supermarkets, 700 petrol yards and 100 convenience stores. The deal is not expected to come under scrutiny from the competition watchdog, the Competition and Markets Authority (CMA), which already considers the two companies to be one because of their existence. joint ownership.
The GMB union, which represents thousands of Asda workers, called on the government to prevent the merger, which was expected, arguing that it would be bad for consumers and workers.
GMB regulator Nadine Hutton said: “GMB believes that this merger requires appropriate scrutiny from the CMA. We are concerned that rising interest rates will leave the debt of the UK’s third largest retailer unsustainable.
“GMB’s priority is to protect and improve the functions and conditions of our members, and we believe this consolidation makes that more challenging.”
EG is expected to maintain its headquarters in Blackburn, Lancashire, from where it will operate its international business, which includes forecourt businesses in the US and across Europe while Asda will continue to operate in Leeds, Yorkshire.
However, the deal is expected to generate around £100m in cost savings and drive Asda’s shift to convenience stores.
Asda was bought by billionaire Issa Al Akhawain and private equity firm TDR Capital for approximately £7 billion in 2020.
Since then it has undergone a series of cost-cutting moves including lowering insurance premiums for delivery drivers and workers near London, closing pharmacies and changing night shifts.
The supermarket had already announced a plan to open 200 Asda On the Move convenient locations on petrol forecourts in Egypt. The retailer is also acquiring 132 Co-op convenience stores.