The British billionaire Issa brothers and private equity group TDR Capital have agreed to buy the British supermarket chain Asda from Walmart WMT.L for an enterprise value of $8.8 billion and plan to roll out more smaller stores.

The deal will enable Mohsin and Zuber Issa, who founded petrol station operator EG Group nearly two decades ago, to take Asda back under British ownership for the first time since 1999, when Walmart paid 6.7 billion pounds for the business.

The new owners want to drive growth at Britain’s third-biggest supermarket chain by expanding its presence into smaller neighbourhood shops to add to its large supermarket format, bringing it more in line with competitors Tesco TSCO.L and Sainsbury’s SBRY.L which offer both.

Walmart will retain an unspecified equity investment in the business, an ongoing commercial relationship and a seat on the board, while British retail veteran Roger Burnley will remain in charge at Asda.

“After a successful period as part of Walmart we are looking forward to helping Asda build a differentiated business that will continue to serve customers brilliantly in communities across the UK,” the brothers said.

The new owners will invest more than 1 billion pounds in the next three years in Asda to keep prices low and to protect its supply chains.

British finance minister Rishi Sunak welcomed the deal for Asda which will retain its headquarters in the northern English city of Leeds.

Britain’s highly competitive supermarket sector has been upended this year by the COVID-19 crisis which sparked a jump in sales – and costs – as shoppers stocked up on goods during lengthy lockdowns.

While Asda’s sales increased, the chain still lagged market leader Tesco, Sainsbury’s, and smaller rival Morrisons MRW.L.

All of the so-called big-four supermarket chains have also faced fierce competition from German discounters Aldi and Lidl in recent years.

In response, Walmart previously sought to sell Asda to Sainsbury’s for 7.3 billion pounds but the deal was thwarted by Britain’s competition regulator last year.

The lower price announced on Friday reflects the integration benefits that a merged Asda-Sainsbury’s would have produced.

Source: Reuters

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