‘No price hikes’ in supermarket as Asda buys petrol station operator for £2.2bn
The deal brings together two parts of the billionaire Issa brothers’ business empire.
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Your support makes all the difference.The chairman of Asda has promised that food prices will not go up because of a deal to buy the UK business of its sister company, petrol station giant EG Group, for more than £2 billion.
Lord Stuart Rose said that the supermarket group would need to remain competitive, because if not it would risk its ability to attract customers.
“It will not lead to higher prices as a result of this transaction, that is rubbish,” he told reporters on a call following the deal.
“We will be what we aim to be and what we’ve always been – a highly competitive player in the sector.
“And that’s the only way that you will attract, retain and grow with customers.”
The deal, announced on Tuesday morning after months of speculation, brings together two parts of the billionaire Issa brothers’ business empire.
The brothers set up EG Group in 2001, building it into a global business which has 350 petrol stations and 1,000 food-to-go sites in the UK and Ireland alone.
But the business also has heavy debts and said that it would use the £2.27 billion from selling its UK arm, as well as the 1.4 billion dollars (£1.1 billion) it gained from a deal in the US, to pay down what it owes.
On the call, Lord Rose – who is also EG chairman – and Mohsin Issa tried to bat away concerns that the deal was simply moving debt from EG Group to Asda.
Lord Rose said: “The primary driver of this deal was creating a business, which is a different business and a multi-channel champion to what we were able to do before by bringing in convenience, etc, etc, and scaling up with opportunities.
“Now, if as a consequence of that, you’ve also got the opportunity of deleveraging on the upside, then what’s wrong with that?”
EG has a debt pile of around £7 billion, according to reports.
Its net leverage will fall, meaning the amount of debt it has will be less than five times higher than its earnings before interest, tax, depreciation and amortisation (Ebitda).
But the GMB union has previously said the deal risks lumping part of that debt on to Asda, which already owes around £4.7 billion.
Mr Issa said that the deal will let him offer “Asda’s highly competitive fuel” to even more customers.
The companies hope to make synergy savings of around £100 million from the deal over the next three years, largely through the combined group’s size.
It did not announce any job cuts but did not rule them out.
“We’re going to evaluate, we’ve not gone into that detail today,” Mr Issa said.
“We’ll look at skill sets. There’s complimentary skill sets. There’s not much of an overlap, in terms of Asda runs big boxes, EG runs convenience stores and food service outlets so the overlap is very, very minimal. So we’ll look at that and see where we go from there.”
The combined company is expected to be worth around £10 billion, have revenues of around £30 billion and employ in the region of 170,000 people.
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 had been speculation of a tie-up between Asda and EG Group since just after the Issa brothers bought the supermarket chain for £6.8 billion in 2020.
They swooped on Asda after former owner Walmart’s plan to sell it to Sainsbury’s was blocked.
Lord Rose said: “Asda’s acquisition of EG UK and Ireland will create a consumer champion like the UK has never seen.
“Throughout my career in retail one thing has always been true – that meeting the evolving needs of customers is the route to growth.
“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.”
Mohsin Issa said: “Asda is committed to saving customers precious time and money across their shopping baskets and on the forecourt.
“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.”