EG Group has completed the sale of its UK operations to Asda at a discount on top of securing a fresh $500 million loan as the billionaire Issa brothers seek to reorganise their sprawling retail and petrol forecourt business empire amid high debt burdens.
The acquisition of EG Group’s UK business was agreed an enterprise value of £2.07 billion, some £230 million lower than was previously suggested. Asda said the discounted cost "reflects adjustments agreed between the two parties as they have worked through the detail of the transaction."
Proceeds from the deal will be used to partially refinance EG Group's debt set to mature in 2025, the firm said, in addition to the launch of a new $500 million term loan, due February 2028. EG said more debt refinancing would follow.
Zuber Issa said: “The sale of the majority of EG Group’s UK business to Asda represents an important strategic step for the company, enabling EG to support the continued roll out of its successful convenience retail, fuel and foodservice strategy.
“Following this transaction and the successful extension of the debt maturities to February 2028, EG Group will benefit from a sustainable capital structure from which to build for the future."
Bakery chain Cooplands, as well as franchise outlets with Starbucks and KFC, will continue to be owned by EG under the terms of the deal.
The completed deal marks the latest efforts by the Issa brothers to reorganise their heavy debts.
In March, the firm said it had sold 415 store assets in the US to property company Realty Income, in a $1.5 billion deal which will see it lease the assets back for a $103 million annual rental fee, while In August, EG said it had disposed of 63 sites in Kentucky and Tennessee in a deal with US-listed Casey’s General Stores.
In May, EG said it expected the Asda deal reduce total net debt from $9,801m in March 2023 to $5.4 billion post-merger.
Chair Stuart Rose told reporters at the time that the primary purpose of the deal was to expand Asda’s operations but “if as a consequence you’ve also got the opportunity to deleverage then what’s the problem with that?”
The restructuring comes after the Issa brothers faced tough questions by MPs on the Business and Trade Committee over their management of Asda. Mohsin Issa wrote a detailed letter to the committee, published earlier this month, in which he sought to clarify its corporate structure, setting out a list of 24 companies that were connected to the supermarket.
But the letter contained multiple inaccuracies as to whether companies were located in offshore tax havens, as well as inconsistencies as to the expressed purpose of different holding companies and omissions on other businesses within the corporate structure.
The letter to MPs suggests that three companies -- Asda Group, Asda Stores and McLagan Investments – are domiciled in Jersey, when they are in fact domiciled in the UK.
In a statement Asda said: “Unfortunately, there was an error in the table laying out the group of companies, incorrectly suggesting that Asda Group, Asda Stores and McLagan Investments were Jersey domiciled, when they have always been domiciled in the UK. All group companies are UK registered and pay tax in the UK in accordance with UK tax legislation.”
