Asda is set to increase its footprint in the convenience food sector after acquiring the UK and Ireland business of petrol station giant EG Group for £2.27bn. The deal brings together two businesses already owned by the billionaire Issa brothers. With over 350 petrol stations and 1,000 food-to-go locations, the newly-combined company will have revenues of nearly £30bn and a workforce of approximately 166,000. Asda aims to grow its convenience retail business and plans to rebrand all EG sites in the UK and Ireland under the Asda name. The move comes as Asda faces an ongoing investigation by the Competition and Markets Authority (CMA) over food and fuel prices. Asda plans to invest over £150m to fully integrate the two businesses and hopes to achieve savings of around £100m through increased volume and cross-selling opportunities.
Asda’s chairman, Stuart Rose, emphasized that the acquisition is driven by the goal of driving growth and bringing Asda’s value-driven approach to more communities while accelerating the expansion of its convenience retail business. The supermarket chain already operates 166 “On the Move” convenience stores, which have been rolled out at EG sites since the Issa brothers acquired Asda in 2021. With the rebranding of all EG sites under the Asda name, the company aims to capitalize on its competitive fuel offerings and extend its reach to a larger customer base.
Mohsin Issa, co-owner of Asda, highlighted the positive impact the combination will have on motorists, enabling them to benefit from Asda’s highly competitive fuel prices. As the third-largest supermarket in the UK, Asda currently operates 438 petrol stations, including 129 forecourts acquired from the Co-op in a previous deal.
The Competition and Markets Authority (CMA) is currently investigating all major supermarkets regarding high food and fuel prices. The watchdog is examining whether a lack of competition leads to customers overpaying, despite supermarket claims of keeping food prices as low as possible. Furthermore, a separate investigation into the fuel market has revealed increased profit margins on petrol and diesel by some supermarkets.
Asda plans to invest over £150m in the next three years to fully integrate the two businesses. It anticipates achieving approximately £100m in savings by leveraging the scale of the new group and capitalizing on cross-selling opportunities within its customer base.
While some experts view the tie-up as a strategic move to enhance Asda’s competitiveness in the grocery market, retail analyst Richard Hyman predicts senior-level job cuts as a result of the consolidation. The Issa brothers’ objective in acquiring EG Group is likely to be cost-cutting measures, according to Hyman.
Zuber Issa, co-founder and co-chief executive of EG Group, stated that the sale of its UK and Ireland business to Asda represents a significant strategic step for EG Group. The proceeds from this sale, combined with funds raised from a separate US deal, will be used to reduce EG Group’s debts.
Prior to the announcement of the deal, the GMB union called for proper scrutiny by the CMA. The union expressed concerns about the potential burden of unsustainable levels of debt on Asda, particularly considering the rising interest rates.
Asda’s expansion into the convenience store sector through the acquisition of EG Group’s business positions the company to tap into the growing demand for convenient food options. With the rebranding of EG sites and the integration of operations, Asda aims to strengthen its presence in local communities and further solidify its position in the highly competitive retail market.