A consortium of tdr capital and the two brothers behind the eg group petrol station business has been selected as preferred bidder for uk supermarket chain asda, according to two people briefed on the matter.
Walmart, the us retail giant that has owned asda since 1999, took the decision to enter advanced talks with the group over the weekend. the parties are aiming to strike a deal as soon as this week but there is no certainty a final agreement will be reached, people close to the process said.
Apollo, an us private equity group, was the other bidder after lone star capital pulled out of the race last week. any deal had been expected to value asda at about 6.5bn.
Blackburn-based eg, formerly known as euro garages, already operates forecourt convenience stores for spar and french hypermarket group carrefour. last week, it announced a trial involving asda convenience stores at three of its uk garages.
The private equity firm tdr owns 50 per cent of eg group, with brothers mohsin and zuber issa owning the other half.any deal would be fronted by the issa brothers rather than their eg business. while the bid will be funded with debt, it will not be raised by eg group, one person briefed on the deals structure said. a spokesman for the brothers declined to comment.
The issa brothers have never run a big format supermarket, specialising in convenience stores, cafs and fast food outlets on their forecourts.
Tdr owns stonegate, the uks largest pubs group, and this year bought rival ei group. the combined business runs the slug and lettuce, yates and walkabout chains.
Walmart has sought to reduce its exposure to asda for some time as it focuses on battling amazon in the us and on increasing its presence in faster-growing markets such as india. it regards the relatively mature uk market, with reduced returns on capital and ferocious price competition, as less attractive than at the time of its investment two decades ago.
A proposed sale of asda to uk rival j sainsbury, which would have seen walmart retain a minority stake in the combined group, was blocked last year by uk competition authorities.
A public flotation was the next option, but interest from private equity groups at the start of this year triggered a wider process, which recently restarted after the coronavirus pandemic forced a pause.
The issa brothers, who started out with a single petrol station forecourt in bury, greater manchester, have built eg group into a sprawling fuel and retail business with a debt-propelled acquisitions spree spanning europe, the us and australia.
They have become one of the biggest issuers in europes leveraged loan and junk bond markets alongside telecoms giants altice and liberty global.
Asda declined to comment. the development was first reported by sky news.
Additional reporting by andrew bounds