Asda expected to finalise £10bn merger with EG

The owners of supermarket chain Asda are set to announce the finalisation of their M&A deal with their petrol station empire, EG. While the deal would create a giant company with an operation of 600 supermarkets, 700 petrol forecourts, and 100 convenience stores, concerns have been raised by the GMB Union, which cites the merger as solely benefitting private equity firms and business partners.

In light of this, Claire Trachet, M&A expert and CEO and founder of business advisory, Trachet, comments on the implications of the merger and how it will impact the M&A market.

The owners of Asda, the Issa Brothers plan to merge their supermarket giant with the UK arm of EG group, a company they founded and bought them £6.8bn in 2020. The merger would help create revenues of approximately £30bn and 170,000 employees.

According to Kantar, Asda has a 13.9 per cent share of the UK’s grocery market and aims to overtake Sainsbury’s, which holds a 14.8 per cent share. The deal could also help the Issa Brothers secure an improved refinancing deal for the £7bn debt pile they need to refinance.

However, concerns have been raised by the GMB union, which has urged the CMA to look over the deal. The union expressed they do not believe the merger will positively impact the UK economy, the workers, or consumers. Instead, they believe it will solely suit private equity firms and their business partners, in securing an arrangement for debt refinancing.

Claire Trachet (CEO/founder) comments on the implications of the merger and how it will impact the M&A market, “After a slowdown in M&A activity at the beginning of the year due to various macroeconomic challenges, the Asda deal poses a positive shift in M&A activity occurring in the UK.

“This is particularly significant as a vast number of M&A deals have been the result of overseas firms acquiring UK based companies. While the deal does appear ready to go ahead, it will be interesting to see if the CMA reacts to the concerns expressed by the GMB Union.

“Additionally, the rebound of the UK market presents an optimistic outlook for the future of M&A deals. Investors are no longer frozen; they know that there will be opportunities and they are ready to actively seize them. They also know that a lot of these opportunities will be coming from struggling companies, so acquirers know they will be getting a bargain, which presents a more positive outlook for activity.

“In addition, there is a growing number of investors who are sat on a dry powder pile having paused investments due to uncertainty in 2022. This means there are significant opportunities on the horizon, and now is the moment to prepare and get deal ready as optionality will increase in H2 of this year.

By Mark Adair – Correspondent, Bdaily

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