Walmart has found another route out of the United Kingdom, announcing a deal to sell a majority stake in its Asda chain to a consortium of investors led by the same company that purchased Kroger’s U.S. convenience stores, for around $8.8 billion.
The announced sale to the Issa brothers, co-founders of the EG Group, and investment funds managed by TDR Capital, was announced some 18 months after a previous transaction contemplating a $10 billion merger with rival Sainsbury, was shot down by antitrust regulators. The U.K.-based EG Group acquired Kroger’s U.S. convenience stores for $2.15 billion in 2018 and has since acquired the Cumberland Farms c-store chain.
Walmart said it would retain a financial stake in Asda, as well as a board seat and an ongoing commercial relationship. The parties said they intended to retain Roger Burnley as CEO.
Walmart has long sought to reshape its international portfolio behind investments in places like Asia and India where it sees the greatest opportunities for growth. Reshaping its portfolio could presumably also generate further support for pricing and technology investment in the U.S.
Asda, based in Leeds, has traditionally served as a fount of innovation for Walmart US, which styled many of the initiatives powering its recent momentum behind strategies first developed there, including click-and-collect Internet shopping and successful new approaches to worker training. Walmart executives have also spoken of taking lessons in absorbing the blow of rapid hard-discount competition that affected European retailers like Asda sooner than their U.S. counterparts.
“We are delighted to be able to announce this deal today, which we believe creates the right ownership structure for Asda, building on its 71 year-heritage, whilst bringing a new entrepreneurial flair, not only to Asda, but also to UK retailing,” said Judith McKenna, the Asda-bred executive who served as US COO during Walmart’s turnaround has been its International president and CEO since 2018. “I’m delighted that Walmart will retain a significant financial stake, a board seat, and will continue as a strategic partner. Asda has been a powerhouse of innovation for the rest of the Walmart world, and we look forward to continuing to learn from them in the future. This important combination will continue to keep customers and colleagues at Asda’s heart, which is important to us all.”
In addition to pledging to support Burnley—who they said helped the Asda rebound behind consumer changes brought about by the pandemic—the incoming owners said they would maintain pay rates and opportunities for current workers; invest more than $1 billion over three years to further strengthen the business and its supply chain; and increase the proportion of U.K.-based suppliers.
“This new ownership opens an exciting new chapter in Asda’s long heritage of delivering great value for UK shoppers,” Burnley said. “With our combined investment, expertise and ambition; Asda, Walmart, the Issa brothers and TDR have an incredible opportunity to accelerate our existing strategy and develop an even more exciting offer for our customers as well as strengthen our business for our colleagues. In a constantly changing retailing environment, our new ownership will further enhance our resilience, whilst creating significant, additional opportunities to drive growth. For Asda colleagues, a strong and growing business is important for our long-term future. I want to thank every single one of our people for the incredible work they do serving our communities, and together our focus will remain on building a better Asda for the benefit of all.”
Mohsin and Zuber Issa said: “We are very proud to be investing in Asda, an iconic British business that we have admired for many years. Asda’s customer-centric philosophy, focus on operational excellence and commitment to the communities in which it operates are the same values that we have built EG Group on. Asda’s performance through the COVID-19 pandemic has demonstrated the fundamental strength and resilience of the business, and we are excited to support Roger and his team as they continue to reposition the business to drive long-term growth.
“We believe that our experience with EG Group, including our expertise around convenience and brand partnerships and our successful partnership with TDR Capital, can help to accelerate and execute that growth strategy. After a successful period as part of Walmart we are looking forward to helping Asda build a differentiated business that will continue to serve customers brilliantly in communities across the UK.”