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The Issa brothers and TDR capital have announced a financing package to underpin their £6.8bn acquisition of Asda from Walmart, which includes plans to sell the supermarket’s forecourts business and certain distribution assets.
As part of the financing of their acquisition of Asda, the Issa brothers, TDR Capital and Walmart announced today that they intend to launch the syndication of €840m of institutional term loan facilities and will later issued £2.25bn of senior secured loans notes and £500m of senior notes.
Additionally, on completion of the acquisition, Asda’s forecourts business will be sold to the Issa brothers’ EG Group for a headline enterprise value of £750m, which represents a multiple of over 11x EBITDA.
This transaction remains subject to clearance from the Competition and Markets Authority, as part of the CMA’s review of the acquisition of Asda by the Issa brothers and TDR Capital.
The forecourts, which will remain an “integral part of the broader retail locations” where they are situated, will continue to be branded Asda and will remain a price leader in the fuel market.
Meanwhile, the Issa brothers and TDR Capital also announced that, following receipt of the CMA’s clearance, they plan to sell certain distribution assets to institutional real estate investors.
Asda will continue to operate these distribution assets and the two prospective owners said the transaction will have no day-to-day impact on the operations of those sites, Asda’s supply chain or workforce.
After regulatory approval, the Asda board will comprise Mohsin and Zuber Issa CBE, Manjit Dale and Gary Lindsay of TDR Capital and Chris Nicholas, EVP and chief financial officer for Walmart International, in addition to Asda CEO Roger Burnley who will also join the board.
In due course, independent directors will also be appointed to the board.
Mohsin and Zuber Issa said: “Asda is an iconic British business that we have known and loved since we were children. We are proud to bring its ownership back to the UK and delighted that, with the support of TDR Capital and Walmart, we can invest in its future. Local control means that strategic decisions will be more closely aligned with colleagues, customers and communities.
“With TDR Capital, our long time partners, we are committed to supporting Roger Burnley, chief executive of Asda, and his team as they continue to reposition the business to drive long-term growth. We are putting in place a robust capital structure to support that growth strategy, and we are confident that external investors will share our belief in Asda’s strong fundamentals and exciting future prospects.
“Looking ahead, and subject to the required regulatory approvals, we look forward to working with our Asda colleagues to build an even stronger, more differentiated retailer - including through the investment of more than £1 billion in the next three years to further strengthen the business and its supply chain.
“We are also excited about the proposed integration of the Asda forecourts into EG’s established UK operations, which we believe would underpin the future growth of the combined network.”
Gary Lindsay at TDR Capital said: “We are very proud to be investing alongside Mohsin and Zuber and supporting the next phase of Asda’s exciting growth journey. Asda has strong foundations and under the leadership of Roger and his team we look forward to seeing the business move from strength to strength in the future.”
Subject to approval from the Financial Conduct Authority, the acquisition of Asda by the Issa brothers and TDR Capital is expected to complete later this month.
The transaction will remain subject to clearance from the Competition and Markets Authority, which is currently expected in the second quarter of 2021.
Morning update
The major news from the US markets last night was Amazon’s announcement that CEO Jeff Bezos will transition to the role of executive chair in the third quarter of 2021
Bezos has led Amazon since 1994 and will be replaced by Andy Jassy, who currently leads Amazon’s cloud computing business.
In a letter to staff, Bezos said the move would give him more time to focus on his other interests.
He wrote: “”As Exec Chair I will stay engaged in important Amazon initiatives but also have the time and energy I need to focus on the Day 1 Fund, the Bezos Earth Fund, Blue Origin, The Washington Post, and my other passions.
“I’ve never had more energy, and this isn’t about retiring. I’m super passionate about the impact I think these organisations can have.”
Meanwhile, Amazon’s fourth quarter net sales jumped 44% to $125.6bn in the final three months of the year.
Excluding the $1.7 billion favourable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 42% compared with fourth quarter 2019.
Overall net sales for the year increased 38% to $386.1bn.
Operating income increased to $6.9bn in the fourth quarter, compared with operating income of $3.9 billion in fourth quarter 2019.
Net income more than doubled to $7.2bn in the fourth quarter.
Fourth quarter sales at physical stores – which overwhelmingly represent its Whole Foods supermarket arm – fell 7% like for like in the quarter to $4bn.
Amazon stock was up 0.3% to $3,390 in afterhours trading.
On the markets this morning, the FTSE 100 is up 0.3% to 6,537.5pts so far this morning.
Risers include SSP Group, up another 7.3% to 328.2p, Marston’s, up 3.7% to 91.4p and FeverTree, up 2.5% to 2,426p.
Fallers include Science in Sport, down 2.3% to 43p, Stock Spirits, down 1.3% to 277p and Applegreen, down 0.9% to 500.3p.
Yesterday in the City
The FTSE 100 gained a further 0.7% to 6,558.9pts yesterday as global stock markets returned to stability after the Gamestop-driven chaos of last week.
Risers yesterday included travel food specialist SSP Group, up 7.1% to 306p, Naked Wines, up 5.5% to 754p, Science in Sport, up 4.8% to 44p, Diageo, up 3.5% to 3,044p, McBride, up 3% to 81.6p, PayPoint, up 2.7% to 646p and C&C Group, up 2.2% to 235p.
The day’s fallers included soft drinks maker Nichols, down 7% to 1,205p, Just Eat Takeaway.com, down 3.3% to 8,134p, Sainsbury’s, down 1.6% to 238.5p, Marks & Spencer, down 1.1% to 138.5p and Ocado, down 1% to 2,800p.
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