the Issa-TDR offer has been backed by various lenders
The Issa brothers have moved into the lead to clinch the biggest deal of their career, the takeover of Asda that will value the supermarket chain at more than £6.5 billion.
The billionaire brothers are behind Euro Garages, one of the UK’s biggest petrol station operators.
A consortium led by Mohsin and Zuber Issa, and TDR Capital, a London-based private equity firm, has been selected by the American retail giant Walmart as the preferred bidder for Asda.
Sky News reported that a deal has not been formally struck but sources said that the brothers’ offer was now leading the race to buy Asda.
The sale of a controlling stake in Asda would see Walmart return to majority British ownership for the first time since 1999.
Walmart’s decision to select the Issa brothers’ bid will dismiss speculation that it was likely to pursue a deal with Apollo Global Management, the buyout firm which has been working with former Debenhams boss Rob Templeman.
Another private equity firm, Lone Star Funds, had been working with former Asda executive Paul Mason but later pulled out of the auction.
Asda’s impending sale comes more than two years after a proposed merger with rival supermarket chain Sainsbury’s. This was eventually stopped by competition regulators.
Reportedly, the Issa-TDR offer has been backed by various lenders including Barclays, ING, Lloyds Banking Group and Morgan Stanley.
According to sources, a formal agreement could still be several days or weeks away.
A sale is expected to see Walmart retain a minority stake in Asda, which has battled with Sainsbury’s and WM Morrison to close the gap on Tesco, even as Aldi and Lidl have attempted to position themselves as cheaper rivals in a competitive market.
Amazon’s move into the sector, which has included a partnership with Morrison, has also paved the way for a long-term shift in the industry.
The Issa brothers were seen as an “entrepreneurial” option to help Asda grow, according to one source.
It is understood that the brothers and TDR intend to keep Asda’s chief executive Roger Burnley in his role.
In a recent quarterly trading update, Walmart said that Asda would focus on expanding its online sales capacity amid a continuing slide in its market share.
Mr Burnley stated that the Coronavirus pandemic had “created a structural shift in customer behaviours towards grocery shopping”.
The Issa brothers’ prospective acquisition comes after revealing their new £35 million Euro Garages Headquarters in Blackburn.
The four-storey building took three years to complete and takes up 130,000 square feet of space.
The new offices have 36 state of the art meeting rooms and can accommodate up to 700 staff with room for more in the future, making it one of the largest commercial building projects of its kind in the region.