// Asda owners the Issa Brothers are close to completing a £12 billion merger of the supermarket chain and their UK petrol stations
// The deal would most likely be structured as an Asda takeover of EG UK, adding more debt to the supermarket’s balance sheet
Asda’s billionaire owners are racing to complete a massive merger of the supermarket chain and their UK petrol stations as part of their efforts to reduce the debt burden of their forecourts empire.
The deal, which is said to be worth £12 billion, would most likely be structured as an Asda takeover of EG UK, adding more debt to the supermarket‘s balance sheet. Asda’s net debt is already £4.7 billion.
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Talks between Asda and EG Group first began back in January and the plan is now being implemented at a rapid pace.
The deal would create a vast group with 581 supermarkets, 700 petrol forecourts and more than 100 convenience stores.
“Obviously, they think it’s a good idea to put the businesses together, but it’s a matter of getting it done,” a City source told the title.
In an environment where interest rates have risen sharply, EG Group needs to refinance £7 billion of debt by 2025. The owners hope that by combining the two profitable, cash-generating businesses, they will be able to refinance at a better rate.
Mohsin and Zuber Issa have already opened over 100 Asda convenience stores on EG’s forecourts in the United Kingdom.
EG announced a deal for the sale and leaseback of 415 US stores worth $1.5 billion (£1.2 billion) this month. The company made $1.46 billion in underlying profits on $33 billion in sales last year, while Asda made £1.32 billion on £23.5 billion in sales.
Lord Rose, the former chief executive of Marks & Spencer, is likely to lead the combined group. The transaction is being advised by bankers from Rothschild, Barclays, and JP Morgan.