Petrol station giant favourite to acquire Asda

British supermarket chain Asda may come into the hands of petrol station operator EG Group. With the support of investor TDR Capital, the acquisition candidate will offer 6.5 billion pounds for the third largest food retailer in the United Kingdom.

Expansion with tank shops

TDR Capital and service station group EG are leading the race for Asda, the third largest supermarket chain in the UK. Together they made a 6.5 billion pound (7.12 billion euros) bid for the retailer, according to The Guardian. This is more than a previously competitive bid from private investor Apollo Global Management.
 

In addition, Asda owner Walmart has declared the bidder a favourite because it sees potential synergies in the acquisition. Indeed, EG could install petrol stations on the supermarkets’ car parks, while Asda could also operate petrol shops. Earlier this month, Asda already announced – coincidentally or not – plans to test three convenience shops in cooperation with EG Group.
 

EG (EuroGarages in full) is a large international player in the market, established in 2001 near Manchester. Brothers Mohsin and Zuber Issa, sons of Indian migrants, opened their first petrol station there. Today, following a merger with the EFR Group in 2016, the group is estimated to be worth 10 billion pound. The Issa brothers each still own a quarter of the group, the other half being owned by investor group TDR.

Counter-bid? 

However, if the EG makes the winning bid, the acquisition might trigger a competition watchdog investigation. That would be a thorn in Walmart’s side as the US hypermarket giant already saw an attempt to sell Asda to Sainsbury’s fail last year due to opposition from the UK competition authority.
 

However, opponent Apollo, which is working on the deal with Rob Templeman, the former boss of Debenhams, would be a less interesting option because the takeover would increase debt. The takeover candidate mainly wants to invest in online expansion. Nevertheless, it is possible that Apollo is preparing a counter-bid.

The third candidate, private investor Lone Star Funds with the support of former Asda top executive Paul Mason, was already excluded last week because the bid was too low. Walmart is looking for more than just the best price when choosing a buyer, the retail giant wants to keep a minority stake and hopes one day to float the British subsidiary on the stock exchange. An agreement may be announced as early as this week.