The owners of Asda and petrol stations giant EG Group were on Thursday applying the finishing touches to a £10bn merger of their operations in Britain.
Sky News has learnt that the billionaire Issa brothers – Mohsin and Zuber, who launched EG Group – and TDR Capital are aiming to announce the tie-up on Friday.
The combination of Asda and EG UK will create a behemoth with 170,000 employees and annual revenues of close to £30bn.
In total, the group will operate nearly 600 supermarkets, 700 petrol forecourts and 100 convenience stores.
More than 20m customers pass through Asda stores and EG’s UK forecourts each week.
It will represent the biggest deal in financial terms in the career of Lord Rose of Monewden, the former Marks & Spencer and Ocado Group chairman who now chairs both Asda and EG.
Lord Rose and the enlarged group’s shareholders are expected to use the deal to accelerate Asda’s drive into the convenience store sector – a segment it has historically been slow to embrace even as rivals Asda and J Sainsbury have expanded into it aggressively.
“Having a bigger and better convenience proposition across such a vast network and utilising Asda’s brand positioning makes enormous sense during a cost-of-living crisis,” said one rival retail executive.
Banking sources said that Apollo Global Management had been lined up to provide more than £500m of private placement debt to finance the deal between Asda and EG UK.
Apollo was among the leading contenders to buy Asda from Walmart, the American retail giant, when it was put up for sale in 2020.
That auction was initiated by Walmart after the Competition and Markets Authority blocked the merger of Asda and Sainsbury’s.
Talks about a combination of Asda and EG UK have been underway for more than six months, and were initially reported by The Sunday Times in January.
Last month, Bloomberg News said the tie-up would generate more than £100m of synergies between the two businesses.
Lenders providing financing to the transaction include are thought to include Barclays and HSBC, with the former also advising on the deal alongside Rothschild.
Roughly £7bn of EG’s debt is due to be repaid in 2025, while the combined group will own commercial real estate assets valued at more than £9bn.
Friday’s merger will be structured as an acquisition of EG UK by Asda costing approximately £1.25bn, and will create one of Britain’s biggest private sector employers.
Competition watchdogs have already closely scrutinised the implications of Asda and EG being controlled by the same shareholders when the supermarket chain was acquired by them for £6.8bn.
Asda last year also struck a deal to acquire 130 petrol stations from the Co-op Group for about £600m, and has since offered to offload 13 sites to allay competition concerns.
There are not expected to be significant redundancies announced as a result of the Asda-EG deal, with EG retaining its headquarters in Blackburn, Lancashire, and Asda remaining based in Leeds, Yorkshire.
Neither Asda nor EG could be reached for comment.