Asda to buy gas station giant for £2.3bn amid concerns over fuel prices

Mohsin (left) and Zuber Issa founded EG Group with a single site in Blackburn. Photo: Jon Super/Alamy Stock Photo

The billionaire Blackburn brothers behind Asda are set to merge the supermarket with their UK gas station business.

Asda said on Tuesday it had reached an agreement on 2 £3bn to buy most of the UK and Irish operations of EG Group, the forecourt operator. Both companies are owned by the brothers Issa, Mohsin and Zuber.

The move would create a combined group worth more than £9bn and is part of the Issa brothers' plans to pay off debt amid soaring interest rates.

Zuber Issa, co-owner of both businesses, said EG Group would “benefit from a significant balance sheet strengthening” from the merger with Asda.

However, this combination is likely to raise concerns for about the lack of competition in the gasoline and diesel market.

Earlier this month Competition & The Markets Authority (CMA) said it believes weakening competition among supermarkets could push up fuel prices. The company has urged grocery store executives to explain themselves.

Asda will acquire 350 gas stations in a deal with EG Group, as well as 1,000 takeaway food outlets.

Mohsin Issa, co-owner of Asda, said: «The combination of Asda and EG UK&I will be good news for motorists as we will be able to offer Asda's highly competitive fuel to even more customers.»

The CMA is currently considering whether to approve whether Asda's plan to buy 130 stations from Co-op in a separate deal.

EG Group, the fuel station business started by Mohsin and Zuber Issa in 2001, has grown from a single station in Blackburn to one one of the world's largest fuel suppliers.

Its rapid expansion was financed by London-based private equity firm TDR Capital, which helped complete a series of acquisitions.

However, most transactions were financed by loans, and interest rates were low. Rising interest rates are now putting pressure on the heavily indebted Issa empire.

1205 Bank rate

Issas and TDR acquired Asda for £6.8bn in February 2021, with about 95% of the deal funded by debt.

Today's deal values ​​the British and Irish divisions of EG Group at £2.3bn. Approximately £450 million will be invested in the equity capital of Issas and TDR Capital.

The restructuring will help reduce the level of debt in the combined group.

Lord Stuart Rose, former Signs & Amplifiers Boss Spencer , who leads both Asda and EG Group, said: «The acquisition of Asda EG in the UK and Ireland will create a consumer leader the UK has never seen.» a legacy of value to even more communities and accelerating the growth of your retail business.”