// Asda owners the Issa brothers and TDR Capital recycled proceeds from an earlier deal to fund its recent EG takeover
// The pledged additional equity of £450mn originates from a warehouse sale and leaseback arrangement that formed part of the initial buyout
Asda owners are using funds from a previous asset sale to finance their contribution to the supermarket’s acquisition of parts of EG Group, another business they own.
The move is the latest example of its financial engineering approach, allowing the grocery giant to minimize cash outlay.
Last week Asda confirmed its £2.3bn agreement to acquire EG Group UK and Irish petrol station operations.
The companies involved, jointly owned by British businessmen Mohsin and Zuber Issa and private equity firm TDR Capital, will take over 350 petrol stations and over 1,000 food outlets.
The majority of the funding for this deal will come from debt and property sales. EG Group operates various outlets, including Starbucks and KFC, and also owns brands like Leon.
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The Issa brothers and TDR also said they would contribute “£450m of additional equity” towards the transaction.
According to sources, the company confirmed to lenders that the equity came from a previous real estate deal.
In a recent call with reporters, Mohsin Issa mentioned that the equity was currently “part of the business.”
Will Asda’s EG Group acquisition pay off more than just interest?
In 2021, TDR and the Issa brothers financed £950m of their £6.8bn acquisition of Asda through a sale and leaseback arrangement of its warehouse network. The property portfolio was purchased by US investor Blackstone for £1.7bn, resulting in a windfall of £450m in equity for the owners.
Asda said the EG deal was about “driving growth, providing value to customers and creating a stronger, more diversified business”.
“Asda will have a sustainable capital structure, strong cash generation capabilities and clear strategy to grow ebitda, which, all combined, will enable Asda to reduce its debt over time,” the company added.
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