EG Group looking to buy Asda from Walmart in shrewd move

MarketLine   30 September 2020 (Last Updated September 30th, 2020 16:31)

EG Group looking to buy Asda from Walmart in shrewd move

As Walmart offers a majority stake in UK supermarket giant Asda, Euro Garages Group have been named as the current preferred bidders in move that would bring ownership back to the UK.

Euro Garages Group, owned by billionaire Issa brothers and TDR Capital have put forward a £6.5bn valuation on Asda and are competing with Apollo Global Management in the race to acquire the UK supermarket.

Acquisition from EG Group makes the most overall sense for Asda and current owners Walmart as the group is already heavily involved in UK retailing of both food and fuel services of a variety of types. Despite significant difficulties in fuel retailing due to reduced demand and weak fuel prices, EG group has managed to expand dramatically, from only a single location in 2,001 to over 6,000 globally in 2020.

Further to this there is already significant cooperation between EG Group and Asda with the supermarket chain setting up ‘Asda on the Move’ a convenience chain located in EG Group forecourts. On top of its core fuel businesses, EG Group is now a significant food retailer and is the largest KFC franchisee in Europe.

The deal hinges on whether competitors can offer a more appealing bid to Walmart and Apollo Global Management the private equity firm is hoping to do that.

Walmart is keen to reduce its stake in Asda in order to refocus its business on more profitable regions

Despite Asda’s very profitable recent period following the lockdown in the UK, Walmart has for some time been looking to reduce its involvement in the company. It is understood Walmart has long terms goals to see Asda taken public through an IPO, but for now wants to sell its majority stake.

The reason for this move is that Walmart has been struggling to grow the business and that ultimately is what it wants from Asda. Despite reliable profits, new discount retailers such as Aldi and Lidl have absorbed much of the opportunity for expansion in the UK and Walmart is refocusing its efforts elsewhere.

The competition and market authority blocked a potential deal between Sainsburys and Asda which would have appeased Walmart’s goals for growth and as a result the strategy has been changed. Walmart now is focusing on Asia and despite experiencing difficulties in the region is redoubling its efforts.