// EG Group buys Leon in a deal reportedly worth £100m
// EG Group is run by the billionaire Issa brothers, who acquired Asda from Walmart in a £6.8bn deal
// EG Group is also reportedly closing on a deal to take control of Caffe Nero
The new parent company of Asda has announced the acquisition of fast food restaurant chain Leon amid reports that it was also closing on a deal to takeover Caffe Nero.
A figure for the Leon deal was not confirmed by EG Group, the petrol forecourt and convenience store giant run by billionaire brothers Mohsin and Zuber Issa, but a report in Mail on Sunday suggests it could have been worth up to £100 million.
In a statement on Sunday morning, EG Group said the acquisition of Leon as a proprietary brand would complement the growth strategy in its non-fuel operations and enhance its foodservice brand portfolio, which already includes third party brands such as Starbucks, KFC, Burger King, Greggs and Subway.
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EG Group currently operates over 700 foodservice outlets in the UK & Ireland – of which 310 operate from standalone premises – and they accounted for 46 per cent of the firm’s gross profit in 2020.
Leon has a network of 71 restaurants, of which 42 are company-owned and operated on leasehold locations particularly in London and other large cities across the UK.
Leon’s remaining 29 franchised sites are located in transport hubs – mainly airports and train stations – across the UK and five other European markets, principally The Netherlands.
Going forward, EG Group said it would invest in the Leon brand, including plans to open around 20 new sites per year from 2022, as well as broaden the current foodservice offer across the extensive global site network.
EG Group said it also saw “significant potential” for Leon’s non-restaurant products – such as its branded cookbooks, own-brand groceries and ready meals – across its convenience retail proposition.
The Issa brothers added there was a “fantastic opportunity” to further develop Leon’s menu offer, its various concession formats including drive thrus, and to build on the existing network by exploring opportunities across EG Group’s own sites and other strategic locations.
“EG Group continues to identify innovative partnerships and acquisitions that complement our existing consumer offer and enable us to stay at the forefront of consumer trends, particularly in foodservice,” the Issa brothers said.
“Our equity investment in Leon is to strengthen our own participation in the fast-growing contemporary foodservice segment.
“This acquisition aligns with our commitment to being a committed foodservice operator globally, delivers financial benefit to our underlying business, and supports broader commercial strategies to be able to better realise further growth opportunities.”
Leon was founded by John Vincent, Henry Dimbleby and Chef Allegra McEvedy in 2004, and is known for its healthy and environmentally sustainable menu.
“In some ways this is a sad day for me, to part company with the business I founded 17 years ago in Carnaby Street,” Vincent said.
“But I have had the pleasure of getting to know Mohsin and Zuber across the last few years. They have been enthusiastic customers of Leon, going out of their way to eat here whenever they visit London.
“They are decent, hard-working business people who are committed to sustaining and further strengthening the values and culture that we have built at Leon, a business that has my dad’s name above the door.
“Mohsin and Zuber will not just be superb custodians of the Leon brand, through EG Group they have the vision, investment appetite, foodservice expertise and network scale to take Leon to many more people and places.
“This is what Leon has always been built for and I am confident under the new ownership, the brand will flourish and have even greater appeal to a broader customer base, especially outside of London.”
The Leon acquisition follows reports that EG Group was also closing in on a deal to take control of Caffe Nero after buying up the struggling coffee chain’s debt pile.
According to The Telegraph, the Issa brothers have bought around £140 million of loans from Swiss private equity firm Partners Group via investment bank Morgan Stanley.
Buying the loans has reportedly placed the Issa brothers in pole position to takeover Caffe Nero if it were to default on its mountain of borrowing.
Caffe Nero is reportedly at risk of breaching its banking covenants and that the coffee chain could struggle to refinance £145 million of senior ranking debts due to be repaid next year.
A Caffe Nero spokesperson said: “We have had a successful winter and spring trading and are generating positive cash flow and are ahead of forecast for the last five months.
“We are forecasting no covenant issues in our projections over the next 12 months and we look forward to an even brighter future post May 17 when we open up our cafes fully to the public.”
Separately, the Issa brothers are due to find out this week if regulators from the CMA will their £6.8bn acquisition of Asda a final green light.
The deal – first announced last October – was completed in February, when the Financial Conduct Authority approved the takeover and the parties involved in the acquisition said all deal conditions had been met in full.
Prior to the takeover, US retail giant had owned Asda since 1999.
While the CMA approval this week is the final hurdle required for the takeover to go ahead, the parties remain confident of a positive outcome.
This means EG Group, together with TDR Capital, will acquire a majority ownership stake in Asda from Walmart.
Walmart will retain an equity investment in the Big 4 grocer, with an ongoing commercial relationship and a seat on the board.
However, since the deal was completed in February, reports have circulated that senior Asda staff were preparing to quit after receiving their final payouts from the Walmart share scheme.
Chief executive Roger Burnley has already confirmed plans step down from his role after three years, while deputy finance chief John Fallon will succeed Rob McWilliam, who leaves this summer.
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