The next chapter for Asda

Today it has been announced that the Issa Brothers and TDR Capital are to acquire Asda from Wal-Mart in a deal worth £6.8bn on a debt-free and cash-free basis. Asda will continue to be run by the current management team, led by Roger Burnley.

The deal places Asda in a position of growing strength.

Even without the deal, the current trading environment suits Asda’s business model. The retailer’s renewed focus on EDLP will appeal to increasingly value focused shoppers, and its online operation continues to boom as a result of COVID-19 and the consequential changes in shopper behaviour. We have also seen an uptick in the ‘big shop’ mission, which benefits Asda with its large format store estate.

The major strategic benefit of the deal, however, is the Issa brother’s experience, knowledge and success in convenience retailing. Through EG Group, the brothers operate over 6,000 petrol forecourts across the UK and Europe. This gives Asda immediate access into the convenience channel, through a well-established network. On the flip side, EG’s forecourts will benefits from Asda’s strong relationships with branded suppliers, as well as buying power and logistics. The synergies between the two businesses are highly compelling.

Also of great importance, is that Wal-Mart is maintaining a stake in the business. This will provide continued access to Wal-Mart’s valuable know-how, tech investment, innovation and global buying clout.

This deal provides investment (£1bn over three years), greater focus on UK suppliers and ultimately a new growth story for Asda. Its competitors will, no doubt, be watch closely to see how its strategy evolves over the coming months.